Author: Tony Wikrent Page 41 of 48

by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

Strategic Political Economy

Is Capitalism a Threat to Democracy?

In a sweeping, angry new book, “Can Democracy Survive Global Capitalism?” (Norton), the journalist, editor, and Brandeis professor Robert Kuttner… [argues] today’s political impasse is different from that of the nineteen-thirties. It is being caused not by a stalemate between leftist governments and a reactionary business sector but by leftists in government who have reneged on their principles. Since the demise of the Soviet Union, Kuttner contends, America’s Democrats, Britain’s Labour Party, and many of Europe’s social democrats have consistently tacked rightward, relinquishing concern for ordinary workers and embracing the power of markets; they have sided with corporations and investors so many times that, by now, workers no longer feel represented by them. When strongmen arrived promising jobs and a shared sense of purpose, working-class voters were ready for the message.

• You want to save and preserve small and local businesses in your community or town.
• You don’t want a local economy that consists almost entirely of chain restaurants and big box stores and a central business district full of empty storefronts.
• You value the diversity, creativity, idiosyncratic character, and friendliness that thriving small business owners bring to your community or town.

In a phoned-in interview on CNBC, Wilfred Frost urgently reported that Bank of America has received 177,000 applications for some $32.6 billion in emergency liquidity, but so far, only 100 of these loans have been disbursed.
The bank hopes to get most of the stack processed by mid-week, but it’s unclear what they’re basing these hopes on.

So why the reticence from the banking sector? I think liability is a red herring; are they really afraid of the heavy regulatory hand of Steve Mnuchin (or any law enforcer involved in the financial crisis)? It looks to me like they don’t want to do the work. Every expectation is for an absolute crush of applications. Thirty million small businesses could be on the line here. The compliance requirements are minimal but banks always whine about the expense of that; that’s why BofA is restricting to already-vetted customers. And the guidelines, which have been “changing by the minute,” could change again. So why bother with the hassle? The money’s good, but it’s marginal, and the big banks think in billions, not millions….

…I’ve talked to dozens of small business owners who are confused by this program, but who are also desperate to participate. There’s not going to be enough money — Congress gave $350 billion — to begin with. If lenders are slow to open the spigot, a lot of these businesses will go down. They don’t have any cash reserves. There’s a lot of concern. Maybe SBA should have found someone more willing to act quickly.

Germany Announces “Limitless” Aid Program for Small Business: SBA Are You Listening? [Zerohedge, 4-6-20]

…Angela Merkel’s government announced a new “limitless” aid program for small- and medium-sized companies (Ed. Note: not a bailout of Germany’s mega corporations) as part of an effort to support Europe’s largest economy in the coronavirus pandemic.
Merkel’s government will provide guarantees of as much as 100 percent, German Finance Minister Olaf Scholz announced at a joint press conference with Economy Minister Peter Altmaier Monday, Bloomberg reports, adding that loans of up to 800,000 euros ($862,000) that will pay out very quickly will be available.

The existing program only provides for an 80 percent to 90 percent loan guarantee and banks have been reluctant to take on new risk as the economy falters. Private lenders have thus pressed the government to expand the existing program by guaranteeing 100 percent of the loans, which it now appears to be doing.

Over the past week, it has come into focus for policymakers just how much strain state and local government budgets are under. They have to make emergency healthcare expenditures among other emergency expenditures, expand unemployment insurance with very low levels of reserves in unemployment insurance funds and do this while tax revenues fall off a cliff since incomes and sales have collapsed. The CARES act provides $340 billion all together with 80 percent or so going to financing  Coronavirus-related expenditures. 150 billion of which is direct aid to state and local governments. Given the scale of the crisis, this is far from adequate….

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by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

Economic Armageddon

Coronavirus batters US economy as 6.65 million file for unemployment last week
[The Guardian April 2, 2020]

Some 3.3 million had filed for unemployment the previous week, bringing total claims to 9.95 million for the two weeks.

US Labor Market Update
Len Kiefer April 3-2020
Click through to his animated gif graph, which helps visualize the catastrophic economic convulsion we are in. It takes a few seconds to get to the stunning, shocking end.
http://lenkiefer.com/img/charts_2020_04_03/claimsSA_2020_04_03.gif

Jobs Aren’t Being Destroyed This Fast Elsewhere. Why Is That?

This dramatic spike in jobless claims is an American peculiarity. In almost no other country are jobs being destroyed so fast. Why? Because throughout the world, governments are protecting employment. Workers keep their jobs, even in industries that are shut down. The government covers most of their wage through direct payments to employers. Wages are, in effect, socialized for the duration of the crisis.

Instead of safeguarding employment, America is relying on beefed-up unemployment benefits to shield laid-off workers from economic hardship. To give just one example, in both the United States and Britain, the government is asking restaurant workers to stay home. But in Britain, workers are receiving 80 percent of their pay (up to £2,500 a month, or $3,125) and are guaranteed to get their job back once the shutdown is over. In America, the workers are laid off; they must then file for unemployment insurance and wait for the economy to start up again before they can apply for a new job, and if all goes well, sign a new contract and resume working….

This situation for laid-off workers would be bad enough if it were not aggravated by a second American peculiarity. As they are losing their jobs, many workers are also losing their employer-provided health insurance — and now find themselves faced with the Kafkaesque task of obtaining coverage on their own.

One option involves continuing to be covered by one’s former employer, a program known as COBRA. It is prohibitively expensive: Participants have to bear the full cost of insurance, $20,500 per year on average. Another option is to go shopping for a plan on the Affordable Care Act insurance exchange, where one is faced with a bewildering choice between plans like Blue Shield’s Bronze 60 PPO (with a deductible of up to $12,600 per year) and Aetna’s Silver Copay HNOnly (with a $7,000 deductible and up to $14,000 in annual out-of-pocket expenses). The last option is to join the ranks of the uninsured, a catastrophic solution during a pandemic. There are reports that people have already died of Covid-19 because they refused to go to the hospital, worried about bills, or because they were denied treatment for lack of insurance.

Red April: What happens on the first of the month when residents, restaurants, and retail stores don’t pay rent?
Henry Grabar [Slate, March 27, 2020]

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by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

The Pandemic

The Doctor Who Helped Defeat Smallpox Explains What’s Coming
[Wired, via The Big Picture 3-24-20]

Flatten the Curve

By slowing it down or flattening it, we’re not going to decrease the total number of cases, we’re going to postpone many cases, until we get a vaccine–which we will, because there’s nothing in the virology that makes me frightened that we won’t get a vaccine in 12 to 18 months. Eventually, we will get to the epidemiologist gold ring.

What’s that?

That means, A, a large enough quantity of us have caught the disease and become immune. And B, we have a vaccine. The combination of A plus B is enough to create -herd immunity, which is around 70 or 80 percent….

How will we know when we’re through this?

The world is not going to begin to look normal until three things have happened. One, we figure out whether the distribution of this virus looks like an iceberg, which is one-seventh above the water, or a pyramid, where we see everything. If we’re only seeing right now one-seventh of the actual disease because we’re not testing enough, and we’re just blind to it, then we’re in a world of hurt. Two, we have a treatment that works, a vaccine or antiviral. And three, maybe most important, we begin to see large numbers of people–in particular nurses, home health care providers, doctors, policemen, firemen, and teachers who have had the disease–are immune, and we have tested them to know that they are not infectious any longer. And we have a system that identifies them, either a concert wristband or a card with their photograph and some kind of a stamp on it. Then we can be comfortable sending our children back to school, because we know the teacher is not infectious.

And instead of saying “No, you can’t visit anybody in nursing home,” we have a group of people who are certified that they work with elderly and vulnerable people, and nurses who can go back into the hospitals and dentists who can open your mouth and look in your mouth and not be giving you the virus. When those three things happen, that’s when normalcy will return.

Total Cost of Her COVID-19 Treatment: $34,927.43

Israeli doctor in Italy: We no longer help those over 60.

Week-end Wrap – Political Economy – March 22, 2020
by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

The Financial Collapse

The Fed Backfires: Shock and Awe Rate Drop to 0%, Emergency Bond Buying Program Leads to Limit Down Drops in US Equity Futures as Real World Coronavirus Damage Worsens
[Naked Capitalism 3-16-20]

Reserve Requirements
[Federal Reserve, Naked Capitalism 3-19-20]

[Twitter below via Naked Capitalism Water Cooler 3-17-20]

Fed Announces Program for Wall Street Banks to Pledge Plunging Stocks to Get Trillions in Loans at ¼ Percent Interest
Pam Martens and Russ Martens: March 18, 2020 [Wall Street On Parade]

Veterans on Wall Street think of it as the cash-for-trash facility, where Wall Street’s toxic waste from a decade of irresponsible trading and lending, will be purged from the balance sheets of the Wall Street firms and handed over to the balance sheet of the Federal Reserve – just as it was during the last financial crisis on Wall Street.

Capitalism in the time of COVID

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by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

Health Crises

by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

Strategic Political Economy

Lessons for the Green New Deal from the Economic Mobilization for World War Two (PDF deck) [Josh Mason, via Naked Capitalism 3-2-20]

(Based on forthcoming Roosevelt Institute paper coauthored with Andrew Bossie)

Why so much direct public investment?

• Private sector unwilling/unable to bear risk, especially in newer industries

Lessons for Green New Deal

1. Decarbonization may call for large direct investment by public sector as opposed to shifting private investment via prices/subsidies

1. Public role largest in new industries/technologies

1. Public role not just to provide resources, but to solve coordination problems and to bear risk

Third lesson: Full employment is powerful force for redistribution

• 1940s saw the largest compression of incomes in US history as in most advanced countries

• Lowest paid groups (African Americans, agricultural workers) gained most

• Very little direct redistribution – all about labor market

Summary – Three lessons from wartime mobilization:

1. Rapid economic transitions require larger role for direct public investment

1. Output, employment are more elastic than conventional estimates of potential assume

1. Full employment is powerful force for income compression, even without explicit redistribution

Predatory Finance

Alexander Hamilton’s Creations Are in Uncharted Territory: The slide below 1% suggests the Fed has lost control and has troubling implications for the long-term economic outlook.
John Authers, March 4, 2020 [Bloomburg, via The Big Picture 3-5-20]

…what happened on Super Tuesday in the bond market was truly historic. The G-7’s finance ministers and central bankers talked in the morning, produced a statement that the market found disappointing, and then the Federal Reserve announced an emergency interest rate cut…. An emergency cut is intended to deal with extreme financial conditions….

The long-term outlook is now of drawn-out deflationary stagnation. We can see this from another amazing development — the drop in the 30-year yield to a negative level in real terms. In other words, its yield is less than the average inflation rate that can be derived from the inflation-linked bond market. Nothing like this has ever happened before:

Demand for Fed’s Repo Loans Surges Past $100 Billion a Day as 10-Year Treasury Hits Lowest Rate in 149 Years

by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

Strategic Political Economy

Chile’s Struggle to Democratize the State
[NACLA, via Naked Capitalism 2-25-20]
A useful overview of the neoliberal policies enacted by the Pinochet regime three decades ago — protesters chant, “It’s not 30 pesos, it’s 30 years!” referring to the transit fare hike that sparked the social uprising in October 2019 and the 30 years of enforced neoliberal economic devolution. Neoliberal policies were written in Pinochet’s constitution, which is why Chileans are demanding a new constitution. 

General Augusto Pinochet’s 1980 Constitution both symbolizes and imposes the authoritarian model at the root of the ongoing mobilization. The Constitution institutionalized the economic and political domination of the dictatorship and enshrined a neoliberal framework that erased the role of the state in social and economic areas. It restricted political participation, gave the Right disproportionate power, and installed a tutelary role for the armed forces….

Pinochet’s radical neoliberal transformation privatized the pension system and promoted the development of a private sector in the health and education fields. These privatizations have perpetuated inequality and reinforced extreme social divisions. Moreover, Chile is the only country in the world with almost completely privatized water—Chapter III, Clause 24 of the 1980 Constitution establishes the “right” to private ownership of water.

….A 2019 study by The Lancet showed that a woman in a poor district of Santiago lives some 18 years less than a woman in a rich neighborhood in the same city.

…. popular symbols have changed. In large demonstrations in the past, people carried the banners of their political parties or social organizations. Such banners are gone in the protests today, reflecting the spontaneous nature of the social explosion and its distance from the political parties.

[I can see these types of protests erupting in USA, as people give up hope that either the Republican Party – taken over by grifter Trump who lied about his intention to implement populist policies – and the Democratic Party, which is fighting desperately to prevent populist policies from being carried into office by Sanders or Warren.]

Some 70 to 80 percent are in favor of a new Constitution—forged under democracy—to guarantee social rights. Chileans now look forward to the national plebiscite called for April 26 to vote for a path toward a Constitution that will protect the rights to education, health, and decent pensions, among others.

View of the protest of an estimated 1.2 million people in Santiago, October 25, 2019. (Hugo Morales/Wikimedia)

The Carnage of Establishment Neoliberal Economics

Poverty Is All About Personal Stress, Not Laziness