The horizon is not so far as we can see, but as far as we can imagine

Week-end Wrap – Political Economy – May 17, 2020

by Tony Wikrent

Strategic Political Economy

The storm we can’t see

[WaPo, via Naked Capitalism 5-11-20] A must read.

Four relatively narrow policy questions hint at the difficulties ahead. First, the bailout: After the initial $349 billion allotment vanished in days, Congress threw an additional $320 billion into the Paycheck Protection Program, the effort to keep small-ish businesses from firing employees for roughly eight weeks. That just means companies, including many I’ve spoken to, are planning June layoffs. Will Washington put another $670 billion into the PPP just to keep those small businesses afloat through July?

….Third, states and cities are going broke, thanks to the costs of responding to the crisis — from unemployment claims to boosting hospital capacity and purchasing protective equipment — as well as the collapse of income, sales and meal tax payments. New York City says it will need $7.4 billion in federal aid, and the state faces a $13 billion shortfall; Alaska’s budget gap might top $1 billion; Colorado’s, $3 billion. The impact on California’s finances has been termed, simply, “beyond crazy.” That will be true for every single state, every single county, every single city, village and town in the country. Unlike the federal government, which can deficit spend with abandon, state and local governments must balance their budgets, meaning these holes must be closed, immediately, by federal aid, budget cuts or tax increases….

Addressing the Great Depression took enormous creativity and agility by Franklin Roosevelt’s New Dealers; it required massive new social programs, employment efforts that transformed the country and targeted individual industries, right down to literally paying writers to write about the Great Depression. The federal response to that crisis also underscores how large and long the U.S. government’s present-day interventions might need to be. When FDR ran for reelection in 1936 — four years into his New Deal — unemployment still stood above 16 percent, and rural electrification, a cornerstone of the New Deal’s economic development efforts, would take more than a decade to unfold.

It’s clear that we as a country need to be thinking in terms of tens of trillions of dollars of federal effort over the next decade. Planning in terms of weeks and $1,200 stimulus payments certainly helps now, but it’s no Marshall Plan. Every hour and day that the federal government fails to recognize the scale of this problem, the problem gets worse — and the solutions will be harder and more expensive.

by Rep. Pramila Jayapal [CommonDreams, via Naked Capitalism 5-13-20]

Our response here in Congress must match the true scale of this devastating crisis. The Heroes Act—while it contains many important provisions—simply fails to do that.

War Is Peace & K Street Is A Small Business

David Sirota [via Naked Capitalism 5-16-20]

Democrats Have Abandoned Civil Liberties

Matt Taibbi [via Naked Capitalism 5-16-20]

America’s digital Sputnik moment

[The Hill, via Naked Capitalism 5-13-20]

China’s tested the launch of the digital RMB (its currency) this month; its government-backed Blockchain Service Network (BSN) last month; and a new national blockchain committee, also established last month. It brought in top technical talent from China’s most creative and influential tech companies including Alibaba, Tencent, Baidu, and Ping An.\

The most important application of China’s new BSN in the immediate term will likely be the development of digital fiat currencies. China has already test-launched a digital yuan which, due to its ease of transfer on China’s new web, encourages other countries either to use the yuan too or to build their own currency on China’s unified platform. From replacing the dollar as a global reserve currency to reordering capital markets, the implications if left unchecked would amount to a global monetary “shock.”

We need a radically different model to tackle the COVID-19 crisis

James Galbraith [Defend Democracy Press, via Naked Capitalism 5-13-20]

The failures of the public health system border on sabotage. Test kits were available from the WHO in January; the US elected not to use them. The first production of tests from the CDC was botched. Testing was deliberately limited as community transmission grew, so that the virus escaped from early containment that might have been possible. Lockdowns and quarantines came late, were poorly organized and weakly enforced. Supplies of PPE were not allocated to hospitals and health care providers according to need; the Defense Production Act was not deployed in timely and effective manner to ramp up home production; no effective federal system to manage international medical supply chains exists to this day. While some firms have no doubt done their best, reports of profiteering and scams are rampant.

The push to reopen the economy is a further mark of failure. As food supply workers were not properly protected, unacceptable levels of sickness and workplace contamination have occurred, notably in meat. Food banks are in crisis, while milk, eggs and other perishables are wasted. State governments facing fiscal catastrophe press businesses to reopen on terms that cannot be profitable, because capacity is constrained for health reasons. The openings are calculated to force workers off of unemployment insurance, which can be revoked if they decline to return to risky jobs. Many smaller businesses are deciding not to reopen; they will face bankruptcy instead and disappear. Although evictions and foreclosures are technically deferred, many landlords have ignored this and in any event rent, mortgages, utility bills and other debts continue to accrue….

Even if the pandemic is now contained the economy will not revert to “normal.” …The oil sector has suffered a price collapse and borders now on mass bankruptcy; when fracking wells are capped they will sand up and become very costly to reopen, so the US energy-based economic expansion is over. Airplanes are lined up in parking spaces; no new civilian passenger airliners will be needed indefinitely. Households who are either unemployed or working from home (and therefore not commuting) or that face deferred rent and mortgages will not soon be in the market for new cars; in any event the old ones will last longer as they are being driven much less. As office buildings remain empty, new ones will not be built. Similarly for retail stores, already driven to the wall by on-line ordering and deliveries.  The banking sector is on the hook for energy loans gone bad, and for household debts, and for corporate loans that will be at risk once the bailout money runs low. The debts built up during the pandemic will be defaulted in many cases, ruining credit for the households affected. All of which foretells a long depression even under the best foreseeable public health conditions. A cycle of infections and lock-downs will make all of this that much worse….

The specific policies implemented were plagued by problems…  the Small Business Administration issued rules that appeared unusable for many firms, banks gave preference to favored clients, and in the first round also the money soon ran out. In short, the effort to save the economy by pouring money into it through conventional channels was inadequate, ill-considered, inefficient, and in some respects corrupt. The best that may be said is that it was much better than doing nothing at all….

To move forward,  first of all, debts incurred before and during the pandemic will have to be written down. The energy sector and transport sectors will have to be rebuilt, based far more on renewables and sources other than oil. A large share of basic industries – especially in the health sector – will have to be repatriated so that basic sufficiency exists in this country. Millions of people will be needed to monitor and support public health; jobs for them must be organized and funded by the government. State and local governments will have to be federally-funded, in substantial part, to provide basic public services. New and sustainable housing must be built, in new community structures. High speed broadband must be provided to all.  A new financing model – cooperative, with public support – will be required to re-establish small businesses. Local, decentralized cultural and sporting venues will have to replace mass-based experiences; these too will require cooperative structures and public support.   In short, the only way out, remotely acceptable to the population at large, will require a comprehensive restructuring of the economy on a cooperative  foundation, with the government stepping up to guaranteed funding, employment, and public investments….

Waiting for “Rooseveltian Relief”: An Oversimplified Framework for the Employment Situation
Lambert Strether, May 11, 2020 [Naked Capitalism]

….I don’t have time or the inclination to visit Roosevelt’s grave to see if he’s spinning in it, but I doubt very much that Roosevelt would have allowed himself to get wrapped round the axle on complex eligibility requirements….

First, the working class needs to keep its C-M-C’ cycle going. Absent a minimum level of provisioning — unemployment is hard to get, and is not universal; health care is horrible; the rent is too high; the car payments aren’t paused; and on and on and on — There Is No Alternative to going back to work and collecting wages.

Second, the capitalists would like to keep their M-C-M’ cycle going. They too have rent to pay, debts to service, and on and on. I say “would like to” as opposed to “need,” because money tends to flow to those who already have it. Small business, of course, will have the hardest time, and will die and be snapped up by bigger businesses. Big business will do well, as is the way of the world.

Third, despite the yelling and screaming on the teebee, neither liberal Democrats nor conservative Republicans have any wish to disturb the sanctity of the wage relation (C-M-C’). The initial relief package was funneled through unemployment insurance and the PPP precisely for that reason (and not only because our sclerotic relief systems have a hard time writing checks and making bank deposits.) The only generic form of relief — the absurdly low $1200 payment — was carefully made for one time only, and changes to provisioning mechanisms — a UBI, even a Jobs Guarantee — were carefully kept off the table. If you take a second look at the Democrat’s “Rooseveltian” program, you will see that Democrats are still forcing relief through existing channels.

Progressive Policies into the Breach

Ellen Brown: As the Fed abandons Main Street, what can states do?

[Public Banking Institute, via Common Dreams, May 14, 2020]

In a recent article, PBI Chair Ellen Brown says the Federal Reserve’s COVID-19 policies have amounted to a covert war on the states. Meanwhile, the Fed’s bank cronies have made out extremely well and Wall Street’s serious liquidity problem — an ongoing problem long before the pandemic hit — has been hooked up to a free-flowing, multi-trillion-dollar bonanza. The best response? Turn the Fed’s policies to work for the people: By forming their own public banks, states can free themselves from dependence on the federal government, put people back to work, restore and expand local infrastructure, and replenish the local tax base.

“On the positive side, these new easy terms make it much easier for local governments to own and operate their own banks, on the stellar model of the century-old Bank of North Dakota. To fast-track the process, a state could buy a bank that was for sale locally, which would already have FDIC insurance and a master account with the central bank (something needed to conduct business with other banks and the Fed). The state could then move its existing revenues and those it gets from the CARES Act Relief Fund into the bank as deposits. Since there is no longer a deposit requirement, it need not worry if these revenues get withdrawn and spent. Any shortfall can be covered by borrowing at 0.25% from the Fed’s discount window.”

When Pittsburghers banked at the post office
[Pittsburgh Post-Gazette, via Public Banking Institute, May 14, 2020]

“It is time to restore the sorely needed banking services that post offices offered for much of the 20th century. From 1911 to 1966, millions of Americans deposited billions of dollars in the Postal Savings System. Because banks focused on businesses and affluent customers, working people often lacked bank accounts. This widespread financial exclusion led these ordinary citizens to turn to Uncle Sam and demand savings accounts at the federal government’s extensive network of post offices. Once this service was established, any American could walk into a post office and open a savings account….

“Through the Postal Service, … the federal government combatted … entrenched discrimination. [Native Pittsburgher Richard] Brean emphasizes that ‘black residents of the Hill had a nondiscriminatory alternative to the banks: the United States Postal Savings System.’ Black and white, rich and poor, the Postal Service provided all Americans with inclusionary access to savings accounts and low-cost money orders. … [Mr. Brean observes,] ‘Using postal savings and postal money orders was a symbol of black financial independence.’”

“The Way Out — William A. Peffer” 

[Medium, via Naked Capitalism Water Cooler 5-11-20]

From 1890: “The proposed plan rests upon one fundamental principle, namely: The proper function of money is to serve a public use…. the money power is the most dangerous foe to republican liberty at this hour; it must be disabled. Fortunately this can be done justly and peaceable, injuring none, benefiting all. The remedy is to take money out of the list of commodities which may be bought and sold for gain, and limit its use to its proper function of serving the people in the conduct of their everyday affairs.”

Wikipedia on William A. Peffer” 

The Old Order Struggles to Respond

New York Magazine, via Naked Capitalism 5-12-20]

Interesting – it’s Biden who is pushing his advisers to think bigger. That’s a clear sign he needs to replace them.

To date, the federal government has spent more than $2 trillion on the coronavirus stimulus — nearly three times what it approved in 2009. Biden wants more spending. “A hell of a lot bigger,” he’s said, “whatever it takes.” He has argued that, even if you’re inclined to worry about the deficit, massive public investment is the only thing capable of growing the economy enough “so the deficit doesn’t eat you alive.” He has talked about funding immense green enterprises and larger backstop proposals from cities and states and sending more relief checks to families. He has urged immediate increases in virus and serology testing, proposing the implementation of a Pandemic Testing Board in the style of FDR’s War Production Board and has called for investments in an “Apollo-like moonshot” for a vaccine and treatment. And he floated both the creation of a 100,000-plus worker Public Health Jobs Corps and the doubling of the number of OSHA investigators to protect employees amid the pandemic. If he were president now, he said in March, he would demand paid emergency sick leave for anyone in need and mandate that no one would have to pay for coronavirus testing or treatment. As the crisis deepened, he said he would forgive federal student-loan debt — $10,000 per person, minimum — and add $200 a month to Social Security checks.

If Biden wants an FDR sized presidency, he’s going to have to get some advisers who actually know what FDR did. Roosevelt’s reforms of Wall Street actually shifted the balance of economic power away from capital to labor. This shift was completely disruptive. The establishment responded by beginning a sustained effort to build a reactionary conservative/libertarian movement. And, there was even a faction of financiers who plotted a military coup that was supposed to be led by USA’s greatest military hero of the day, Marine Corps General Smedley Butler. But Butler turned the tables on them and went to the newspapers. One of FDR’s worst political mistakes was not prosecuting the planners of the “business plot.” 
Here’s the hard truth — there cannot be an economic recovery with wide spread general prosperity until Wall Street and the financial system in its present form is dismantled and the balance of economic power shifts again in favor of labor. 
The anecdotes in the article make clear how difficult it is for Biden’s team to even conceive of real change. For example: “a 100,000-plus worker Public Health Jobs Corps and the doubling of the number of OSHA investigators to protect employees amid the pandemic. ” Seriously? In fall 1935, FDR put Harry Hopkins in charge of the new Works Progress Administration and within three months, WPA had hired over 4 million unemployed workers and saved them from starvation during the winter. And there remains deadly fixation on deficits: mentioned twice by Biden plus three more times in and anecdote of a rich supporter mentioning concern to Biden’s wife about deficits and moving too far left.
Compared to the FDR’s advisers who created the New Deal such as Harry Hopkins, Frances Perkins, Rex Tugwell, and Adolph Berle — which none of these articles have even mentioned yet — Biden’s advisers are intellectual pygmies. And I’m not sure how much we can hope that Sanders’ picks can persuade Biden’s people to abandon tired old neoliberal tropes and actually think big. 

Joe Biden Wants to Hear From Sanders’ Policy Wonks. Will It Be Enough to Win Over Bernie’s Fans?

[Mother Jones, May 13, 2020]

On Thursday, the Biden campaign revealed the members of six “Biden-Sanders Unity Task Forces” that will develop that policy platform…. The six groups—which will focus on immigration, climate change, criminal justice, the economy, education, and health care—make strange bedfellows of Biden’s and Sanders’ high-profile surrogates. Rep. Alexandria Ocasio-Cortez (D-N.Y.) and former Secretary of State John Kerry, for example, will lead the working group on climate change. Serving alongside them is Rep. Kathy Castor (D-Fla.), a Biden pick who chairs the House’s select committee on climate change, as well as Varshini Prakash, a Sanders surrogate and co-founder of the Sunrise Movement who’s been critical of Castor’s committee.

The Sanders’ picks—which account for slightly less than half of the committees—include some of the biggest names in progressive politics. They include labor leaders such as SEIU president Mary Kay Henry, a “Medicare for All” supporter who slammed Biden’s suggestion that the single-payer plan would hurt unions, and Sara Nelson, the president of the country’s biggest flight attendants association who is often discussed as a next potential leader of the AFL-CIO.

But the Sanders camp also named lesser-known experts who played an influential role in shaping his 2020 platform—ones whose ideas have been at odds with Biden’s advisers. The economics task force includes Stephanie Kelton, an expert in modern monetary theory—a controversial idea that calls for massive government spending—who served as a senior economics adviser to the Sanders’ campaign. The Sanders economic delegation also includes Darrick Hamilton, the racial wealth gap scholar who shaped Sanders’ federal jobs guarantee, as well as his plans for public education, housing plan, and student debt. As I explained in a profile of the economics professor earlier this year, Hamilton’s ideas helped Sanders bridge the gap between systemic racism and economic inequality in his policy platforms, something that has become a key rallying cry of the activist left.

[Vox, May 13, 2020]
For example:

Health Care
Sanders’s picks:

  • Rep. Pramila Jayapal (D-WA), task force co-chair, co-chair of the Congressional Progressive Caucus, and author of the House’s Medicare-for-All bill
  • Dr. Donald Berwick, former director of the Centers for Medicare & Medicaid Services
  • Dr. Abdul El-Sayed, former Michigan gubernatorial candidate in 2018 and single-payer advocate

Biden’s picks:

  • Former US Surgeon General Vivek Murthy, task force co-chair
  • Mary Kay Henry, president of the Service Employees International Union
  • New York University professor Sherry Glied, who served in the Department of Health and Human Services during the Obama administration
  • Chris Jennings, former health care policy adviser during the Obama administration
  • Rep. Robin Kelly (D-IL), who sits on the House Energy and Commerce Committee

Joe Biden’s interview series Here’s the Deal has earned some mockery in left circles as “the verbal equivalent of someone falling down a rocky hill.” But beyond the fractured syntax and low production values, you get real-time insight into how the presumptive Democratic presidential nominee understands the political moment.

And what you hear is a man at war with himself…. No political figure comes up more than Franklin Delano Roosevelt, whom Biden repeatedly lauds…. How a Biden presidency will proceed, and succeed, depends upon his placement on that field. Does he stay on the 50-yard line, splitting the difference between anti-government conservatism and progressive populism, and cutting bipartisan deals? Or does he surge toward the end zone with “Roosevelt” written on it, transforming the nation through “bold, persistent experimentation” that fills in all the cracks the coronavirus exposed?

….But listen to one particular call-and-response with Rev. Barber about the transformative power of this moment, and your confidence in the outcome may waver. “This pandemic [is] almost like the Great Depression, which allowed Roosevelt to do things that he hadn’t imagined doing prior to the Great Depression,” Barber explains. “Exactly,” Biden replies. “If we cannot guarantee health care for everyone and have a universal form of health care, and basic living wages and basic sick leave, we are missing the lesson of this moment,” Barber thunders. Biden responds, “Exactly right, and that’s why I think we can do it.”

You could argue that this was a practiced politician humoring an idealist. But the evidence we have from crises as profound as we face today is that the idealists force the politicians to dream bigger and reach higher.

HISTORIAN CHRISTOPHER SHAW’S 2019 book Money, Power, and the People narrowly focuses on banking policy in the Progressive and New Deal eras. But its value lies in giving voice to the forgotten public anger of the times, and how this moved the political system. The book reinforces the promise of democratic responsiveness, particularly in moments where the public is so brazenly robbed in broad daylight.
Organized by farmer and labor groups, populists channeled their outrage by envisioning a better world. “There can never be a permanent and secure prosperity,” noted National Farmers Union President John A. Simpson in 1932, “until we have destroyed the money power of the country.” Labor leader David Levine echoed this sentiment: “The Nation must own the Banks or the Banks will own the Nation.”

David Dayen, May 13, 2020 [The American Prospect]

On Tuesday the House Democratic leadership unveiled the Heroes Act, a $3 trillion swing at an economic response to the coronavirus Depression. Just writing that sentence violates my personal rule of not paying much attention to legislation that has no chance of becoming law. That’s not hostility but simply what Democrats say out loud: “Democrats acknowledge that their behemoth proposal, whose summary alone is 90 pages, is more of a talking point than legislation that they expect to become law.”

More important is the dynamic on the progressive side. Pramila Jayapal (D-WA), the Progressive Caucus co-chair, objected to the Heroes Act, mainly because her pet project, payroll support for all businesses, was left out. Jayapal does have a concept of the optimal response: keep people connected to their jobs, with the government footing the bill for paychecks. That also keeps people on health insurance and helps keep businesses out of bankruptcy. The pieces fit together, sort of.

The CARES Act didn’t do that. It essentially pushed people onto unemployment, where low-wage workers would earn more than their salary. It also had this Paycheck Protection Program for small businesses to keep people out of unemployment, with their paycheck covered for eight weeks. These programs are almost diametrically opposed. The interim bill extended PPP; in the Heroes Act, the unemployment piece is extended from July to the end of the year. To deal with the uninsured, the Heroes Act subsidizes COBRA, the costliest possible way to maintain insurance rates, really a bailout of that industry.

The Epidemic

MIT Technology Review, via Naked Capitalism 5-11-20]
Lambert Strether’s foreword: “From April, still germane. The tech problems are never the interesting ones. Imagine a functional state….”
[New England Journal of Medicine, via Naked Capitalism 5-16-20]
[WaPo, via Naked Capitalism 5-10-20]

[Rolling Stone, via Naked Capitalism 5-11-20]

Analysis: We Knew The Coronavirus Was Coming, Yet We Failed 5 Critical Tests
Elisabeth Rosenthal, Editor-in-Chief of Kaiser Health News [via Naked Capitalism May 11, 2020]

Economic Armageddon

Ryan Cooper [The Week, via Naked Capitalism 5-16-20]

Thursday brought yet more grim economic numbers, with 2.98 million Americans filing for unemployment over the last week. That makes for 36.5 million claims since the beginning of the coronavirus crisis (though millions no doubt have not managed to make it onto the program rolls, or are not receiving benefits even if they have). A recent Federal Reserve study found that nearly 40 percent of households making $40,000 per year or less lost a job in March.

Millions of people are already unable to afford their rent or mortgage payments, and tens of millions more will be unable to in a few months if nothing changes. America is facing a major housing crisis if it doesn’t get its act together. Either the economic rescue programs need to be strengthened and extended, or we need some kind of cancellation of rent and mortgage payments until things return to normal, or both.

Andrew Biggs [Wharton Pension Research Council Working Papers, via Naked Capitalism 5-13-20]

[D]ue to how the Social Security benefit formula interacts with the sharp economic downturn due to the Coronavirus, some groups of near-retirees are likely to suffer substantial permanent reductions to their Social Security retirement benefits. Assuming a 15 percent decline in the Social Security Administration’s measure of economywide average wages in 2020, a middle-income worker born in 1960 could have his annual Social Security benefits in retirement reduced by around 13 percent, with losses over the retirement period in excess of $70,000.


“The headlines say seasonally adjusted Industrial Production (IP) declined month-over-month – and now is even deeper in contraction year-over-year. Our analysis shows the three-month rolling average declined. The best way to view this is the 3-month rolling averages which declined. The decline was due to the impact of the coronavirus which caused many firms to suspend operations.

[Recode, via Naked Capitalism Water Cooler 5-11-20]

“Sick workers mean meatpacking plants are shutting down, and these closures are contributing to a deeply disruptive breakdown in the meat supply chain. The vast majority of meat processing takes place in a small number of plants controlled by a handful of large corporations, namely Tyson Foods, Smithfield Foods, JBS USA Holdings Inc., and Cargill Inc. More than a dozen of these companies’ beef, chicken, and pork plants closed in April, and despite an order by President Trump to reopen the plants, managers fear that doing so will put lives at risk so facilities continue to close…. The plight of these workers is just the starting point in a chain of crises the coronavirus is creating in America’s food supply. The shuttered meatpacking plants have created a bottleneck in the system through which most meat in the United States must flow in order to get ground beef to Wendy’s, chicken breasts to your local grocery stores, bacon to the nearby diner now trying to run a takeout business, and so on. Things get really tricky on the other side of that bottleneck, where thousands of farmers have planned the lives of their animals around a schedule that terminates at those meatpacking facilities. If those plants aren’t operating, it’s not like they can just keep the cows, chickens, or pigs in a nearby field. Now imagine this at scale. According to Jayson Lusk, an agricultural economist at Purdue University, the meat processing capacity in the United States is down by about 40 percent. In the pork industry alone, that amounts to 200,000 pigs that won’t get sent to slaughter, because the meatpacking plants that would process them are closed or otherwise unavailable. If nothing else changes, those 200,000 excess pigs a day become a million pigs a week with nowhere to go but a mass grave.”

A swath of manufacturing won’t resume production 
[Wall Street Journal, via Naked Capitalism Water Cooler 5-11-20]

“A swath of manufacturing won’t resume production even as states ease coronavirus-driven restrictions. Factory furloughs across the U.S. are becoming permanent shutdowns…. in a sign that the pandemic’s heavy damage to the industrial economy won’t be repaired quickly…. “Makers of dishware in North Carolina, furniture foam in Oregon and cutting boards in Michigan are among companies that have shut factories, and boat-and-motorcycle-maker Polaris Inc. and tire maker Goodyear Tire and Rubber Co. also plan to close U.S. plants. The shutdowns will further erode an industrial base that has been shrinking as a share of the overall U.S. economy for decades and likely will help redraw the country’s distribution maps. Factories have raised output in recent years through automation, but manufacturers’ capital spending since the pandemic has cratered, and plants that haven’t invested are less likely to rapidly resume operations.”

If Landlords Get Wiped Out, Wall Street Wins, Not Renters

[Bloomberg, via Naked Capitalism 5-13-20]

Many U.S. states have imposed moratoriums on evictions. But without a national rental-market bailout, the economic pain is likely to spread as efficiently as the virus that caused it, flowing upward to landlords, their lenders, and cities losing property tax revenue…. Lenders could be collateral damage, particularly regional banks that often finance local property investors. At the end of 2019, there was $1.6 trillion of outstanding mortgage debt on multifamily properties in the U.S…. Small investors own much of the naturally occurring affordable housing in the U.S. If they’re forced to sell or abandon properties, more of the market might wind up in the hands of Wall Street firms, some of which have built up large portfolios of rental properties over the last decade or so.

As economic forecasts worsen, up to $1 trillion in federal aid to state and local governments could be needed by the end of 2021 
[Economic Policy Institute, via Naked Capitalism 5-12-20]

What Are the Consequences of Missed Payments on Consumer Debts?
[Federal Reserve Bank of Chicago, via Naked Capitalism 5-12-20]

Risking their health to pay the bills: 100 million Europeans cannot afford two months without income [Bruegel, via Naked Capitalism 5-12-20]

The Real Unemployment Rate Is Worse Than Trump Will Tell Us
[Washington Monthly, via Naked Capitalism 5-12-20]

Capitalism in the Time of COVID19

‘150,000 Americans Sacrificed for the Stock Market’: Kushner Reportedly Advised Less Covid-19 Testing to Calm Wall Street

[Common Dreams, via Naked Capitalism 5-15-20]

President Donald Trump’s son-in-law and special advisor Jared Kushner reportedly urged his father-in-law in the early stages of the coronavirus pandemic not to prioritize testing or ordering potentially life-saving equipment like ventilators because of fears it might drive down stock prices. Kushner’s efforts to convince the president not to take decisive action were first reported in the Financial Times:

Jared [Kushner] had been arguing that testing too many people, or ordering too many ventilators, would spook the markets and so we just shouldn’t do it,” says a Trump confidant who speaks to the president frequently. “That advice worked far more powerfully on him than what the scientists were saying. He thinks they always exaggerate.”

“And there you have it,” tweeted strategist Mark Elliott. “150,000 Americans sacrificed for the stock market.”

Reminder: When the Very Very Rich Are Done With Us, They Plan to Leave Us Behind

[Naked Capitalism 5-15-20]
Liberty Street Economics, Federal Reserve Bank of New York, May 6, 2020]

….there is no statistically significant relationship between the severity of the economic impact of COVID-19—measured both in terms of cases and unemployment claims—and the share of small businesses getting PPP loans, after excluding New York and New Jersey. First, the chart below shows that there is actually a negative relationship between COVID-19 cases per capita and the share of small firms getting PPP funding, suggesting that credit is misallocated; however, this state-level relationship is not statistically significant after excluding New York and New Jersey. Results are unchanged if COVID-19 deaths per capita are used instead of the number of cases.

The Fed Hasn’t Spent a Dime Yet for Main Street Versus $735 Billion for Wall Street
Pam Martens and Russ Martens, May 13, 2020 [Wall Street on Parade]

Meet the Fed’s Global Plunge Protection Team
Pam Martens and Russ Martens, May 10, 2020 [Wall Street on Parade]

Beginning on February 3, Powell started dialing the head of one central bank after another. We know this because his daily calendars are made public. Before the month of February was over, Powell had spoken to, or met with, the heads of 14 different foreign central banks. This was an unprecedented number of central bank contacts in such a short period of time for a man telling Americans everything was fine with our banks and our financial system.

Equally curious, it wasn’t just the biggest players that Powell spoke to, like Christine Lagarde, President of the European Central Bank (ECB); Haruhiko Kuroda, Governor of the Bank of Japan; Mark Carney, then Governor of the Bank of England; and Yi Gang, Governor of The People’s Bank of China. Powell also dialed up the heads of the following central banks: Canada, Netherlands, Brazil, Mexico, South Korea, India, Switzerland, Belgium, Sweden and France.

The Bailout Is Working — for the Rich
[ro Publica, via Naked Capitalism 5-11-20]

How the COVID-19 Bailout Gave Wall Street a No-Lose Casino

Matt Taibbi [Rolling Stone, via Naked Capitalism Water Cooler 5-14-20]

HEROES Act Delivers a Win to Health Insurance Industry

[The Intercept, via Naked Capitalism Water Cooler 5-14-20]

CLOs: ground zero for the next stage of the financial crisis? 

[Financial Times, via Naked Capitalism 5-13-20]

Envision, one of the largest medical staffing companies, completed a restructuring of its roughly $7bn of debt this month as it moved to stave off bankruptcy. This comes less than 18 months after KKR — one of the oldest and largest US private equity firms with more than $200bn of assets — bought the Nashville-based company for nearly $10bn. The Envision deal highlights one of the stress points in a financial system that is creaking under the pressure of the coronavirus-induced recession. To fund around two-thirds of the acquisition, KKR loaded the company’s balance sheet with junk-rated loans and bonds — a familiar private equity tactic. Those securities provided fuel for one of Wall Street’s least known but most important debt machines: collateralised loan obligations.


The Carnage of Establishment Neoliberal Economics

[Pro Publica, via Naked Capitalism Water Cooler 5-15-20]

The tax breaks and credits would transform Hoffman Estates, then a suburb of 45,000 that lay among cornfields 30 miles northwest of Chicago. Sears worked with state and local politicians to build a sprawling corporate headquarters, new roads, tollway interchanges and other infrastructure in the growing village. Today, Sears, which emerged from bankruptcy last year, is struggling to stay in business, battered by relentless competition and its own miscues and missteps. … The corporate campus built in Hoffman Estates is largely vacant, a hollowed-out shell with a skeletal workforce surrounded by acres of unused parking….

ProPublica and the Daily Herald wanted to know whether the investment paid off. Where has the deal succeeded? Where has it failed? What did Illinois and Hoffman Estates taxpayers get for the half billion dollars awarded to Sears? The review of the Sears deal shows that 30 years of spending public money on private interests failed to deliver the economic bonanza envisioned by corporate, state and local officials.

When the deal was getting off the ground in 1989, an economic impact study forecast that a special tax district created for Sears would generate the equivalent of $626 million in total property tax revenues by 2012. Total revenues wound up actually being closer to $338 million, when adjusted to 1989 dollars — 54% of what was projected.

Being poor or a minority literally destroys your health on a molecular level

[Twitter, via Naked Capitalism Water Cooler 5-11-20]
Jocelyn J. Fitzgerald, MD
In med school, I took an elective called “Stress”, foolishly thinking I was going to learn about meditation and yoga. Instead the professor spent 6 weeks proving that being poor or a minority literally destroys your health on a molecular level, and I think about that every day.
1:02 PM · May 10, 2020·Twitter Web App
Jocelyn J. Fitzgerald, MD
For those asking: I found 8 of his easy-to understand lectures on the effect of stress on your health (and tips for how to cope with it) organized online for free!
10:47 PM · May 10, 2020·

Information Age Dystopia

Techno-Tyranny: How The US National Security State Is Using Coronavirus To Fulfill An Orwellian Vision
[Last American Vagabond, via Naked Capitalism 5-12-20]

Creating new economic potential – science and technology

Scientists Have Developed a Membrane That Separates CO2 From Other Gases

[Science Alert, via Naked Capitalism 5-10-20]
[Reuters, via Naked Capitalism 5-11-20]

“Intel Corp is in discussions with the United States Department of Defense over improving domestic sources for microelectronics and related technology, Intel spokesman William Moss said in an emailed statement… Taiwan Semiconductor Manufacturing Co., on the other hand, has been in talks with the U.S. Department of Commerce about building a U.S. factory but said it has not made a final decision yet…. The [Wall Street Journal] had also reported that U.S. officials are looking at helping South Korea’s Samsung Electronics Co., which has a chip factory in Austin, Texas, to expand its contract-manufacturing operations in the United States.”

[NYT, via Naked Capitalism 5-11-20]

….the report by Australian regulators left little doubt about what they see as the cause of local journalism’s demise — the near monopolistic power of Google and Facebook. And it has set off a chain of events that could shift the balance of power between big tech and the news at a dire moment for journalism.

“Global tech companies are not beyond national laws, especially when there is so much at stake,” Rod Sims, the chairman of the Australian Competition and Consumer Commission, and author of the report….

Last month, as the coronavirus put hundreds of publishers out of business around the world, the Australian government instructed Mr. Sims to force the platforms to negotiate payments with newspaper publishers — making it the first country to do so….

In France, where regulators are demanding that Google cut a deal to pay publishers, the pandemic crisis has added “all the more urgency,” said Ms. de Silva, the president of the French Competition Authority, which is enforcing a European Commission change to copyright law that will soon take effect across the continent.

Players on all sides predict the Australian and French decisions will set global precedents. Leaders from Ireland to Malaysia have indicated they’re paying attention. And in the United States, where antitrust laws are weaker and regulators have been more laissez-faire, starving publishers are licking their chops.

Democratic Party leadership insists on suicide

Bernie world descends into disarray

[Politico, via Naked Capitalism 5-16-20]
[The Atlantic, via Naked Capitalism Water Cooler 5-15-20]

“‘People are really starting to just look around and say, ‘Man, capitalism isn’t working,’” said the co-chair of the Detroit DSA chapter, who spoke to me on the condition of anonymity for fear of professional repercussions. ‘If the markets can’t even produce hand sanitizer or toilet paper or masks during a plague—what good is this system?’… ‘We’re going to see real change after this,’ Harms said. ‘People won’t forget what this was like—to not have income and not have a job and still be expected to pay all these different bills.’”

The Dark Side

[The Hill, via Naked Capitalism 5-15-20]
[New Yorker, via Naked Capitalism 5-16-20]
[Bloomberg, via Naked Capitalism Water Cooler 5-15-20]

“Michigan closed down its capitol in Lansing on Thursday and canceled its legislative session rather than face the possibility of an armed protest and death threats against Democratic Governor Gretchen Whitmer.”

“No More Open Carrying At Political Protests”
[The American Conservative, via Naked Capitalism Water Cooler 5-15-20]

”I know my way around a gun better than a lot of civilians, and even I get nervous in the presence of an open carrier. It’s not an irrational fear of guns; it’s a very rational fear of people. Such people need to see fear in the eyes of others. They then threaten and mock anyone who takes it as a threat. When mobs carry guns on city streets while making political demands, they extend this threat exponentially. They want everyone in a several-block radius, perhaps in the entire country, to know that they are ready to kill. For all their talk of liberty, these armed protesters scorn the non-aggression principle that true libertarians hold sacred. The armed Reopeners who terrorized Michigan’s state legislators aren’t Branch Davidians or Cliven Bundy’s militia allies. They don’t just want government to leave them alone; they want to shape policy, and not with the ballot but with the bullet. When I saw those American citizens using firearms to intimidate lawmakers in the halls of government, I thought of another March on Rome, the bloodless coup that brought Mussolini to power and inspired Hitler’s Beer Hall Putsch.”

Why Armed Right Wingers Were Able To Shut Down Michigan’s Legislature
Ian Welsh, May 15, 2020

This is clearly intimidation of elected officials. It would not be tolerated from the left, but it has not only been tolerated from the right, it has been allowed to succeed….

But what’s more interesting to me is that it has been allowed. The protesters could be shut down if the government wanted to. There might be some violence, but America is routinely willing to be violent, so that’s not what’s stopping the government.
Violence and threats from the right are seen as legitimate: they are seen as having the right to be violent. God, Guns and ‘Merica. The right has arrogated to themselves the glory and right and violence. They say that violence is ethical and moral in defense of freedom, and that people who are violent and defenders of America and goodness are right wingers…. [But] The left are godless communist hippies who don’t have a right to be violent. They don’t join the cops or the military, they are not associated with legitimate violence. Most left wingers have spent 60 years, since the 60s, explicitly saying that violence is always bad and never justified. Much of the left rejected Antifa, the people willing to fight fascists, because violence can never either be moral, or according to most left wingers, even effective. Violence is always bad and doesn’t work as well as non-violence is what a majority on the left believe.

This wasn’t always the belief. Unions fought from their earliest history right through the 70s: they would take on the police and union busters. The left fought. In the early 70s the left was setting off multiple bombs a day; they ran rings around the FBI, who could not stop them; the left-wing insurrection didn’t end because the cops won, it ended because the left itself decided to stop using violence.

A sea change happened in the 60s and 70s: one where the legitimacy of violence was rejected by the left, and violence was gifted to the right. The end of the draft and the left wing hatred of all violence meant that the left gave the military to the right wing. Cops have always been right wing, of course, but the draft had meant that the rank and file military included many left wingers. It also meant that people on the left had violent skills, taught courtesy of the military.

That ended. Meanwhile the right, including the most far right, encouraged their people to join the military and the policy, to learn the skills and to make sure those institutions were run by right wingers from top to bottom.

‘Zombie Neocon’: How This Iran Contra Architect Is Leading Trump Policy 

[American Conservative, via Naked Capitalism 5-15-20]
US Special Representative for Venezuela Elliot Abrams

“Trump Brings in the Infantry for His War on Blue America”

[The Atlantic, via Naked Capitalism Water Cooler 5-15-20]

“Trump revealed volumes about his mindset at a recent White House event, when he was asked about providing more federal aid to states buckling under the lost revenue and increased cost of grappling with the coronavirus. Trump said he might be open to considering such assistance, if it were narrowly tied to costs directly linked to the outbreak. But then he added: ‘We’d want certain things, also, including sanctuary-city adjustments.’ The most telling word in that sentence is the pronoun we. It suggests the existence of an American community from which blue states are distinct and separate—and to which blue states must provide concessions if they are to receive help from the federal government. Leaving aside the reality that many Republican-run states are facing financial difficulties as great as the Democratic-run ones, Trump’s formulation shows how little obligation he feels to represent the places where fewer of his own voters live. Instead, he portrays those places almost as foreign supplicants seeking aid from his America. ‘This president is seeing himself as the president of red America, where blue America is pushed aside and is not even legitimate,”‘


May 17th US Covid Data


May 18th US Covid Data


  1. Stirling S Newberry

    Short story: It is a crisis! Quick, make the rich richer!

  2. Hugh

    Stirling, well said. Loot to a crash, then loot the crash.

    So the Biden-Sanders panels, rapacious neoliberals and goofy MMTers. What could go wrong?

    I am always amused by all these China next big thing stories. We still get Belt and Road stuff even as the pandemic shines a bright light on the lunacy of long, fragile supply and transportation lines. To those paying attention, climate change did this a long time ago. Now we have unsustainably energy intensive Chinese currency blockchains that are going to challenge the dollar even as much of the world economy is collapsing. Oh, and the Chinese running the cryptography. Again what could go wrong? And again we have climate change and overpopulation standing in the way. US hegemony is on its way out. It’s not just the greed and unimaginable stupidity of our rich and elites. It is these two existential crises. Both we and the Chinese –and everyone else have until 2030 to get our acts together. We obviously don’t have our s– together, but neither do the Chinese. On top of this, the Chinese have no knowledge or experience being a hegemon. They have, as they have had, for more than 2,000 years, an imperial outlook. Hegemonic and imperial are not synonyms. It takes crushing outflows of wealth to create and maintain a hegemonic system. An imperialism, on the other hand, is much more about increasing inflows. It is about profiting off a system or off the lack of one, not building and maintaining one. Russia is imperial, for example, while the USSR was hegemonic. Except for the one instance of the Korean War under Mao, modern China has never gone the hegemonic route.

  3. bruce wilder

    That political “regime” change generally involves monetary regime change. That the dollar as a reserve currency has evolved during the long running down of American hegemony may go without notice. That American hegemony as the organizing basis for the international order is exhausted is evidenced in the domestic collapse of the American economy which occurred in 2007-8 and is now being repeated on a much larger scale.

    Chinese economic policy has long aimed at creating an economic order that would generate for China the same kind of surplus that America and its allies in Korea, Japan and Western Europe long enjoyed from the system of multinational corporations and complex international supply chains. Road-and-belt exists as a component of that general scheme, one meant in part to convey the promise of gains to the Chinese geographic interior to match the gains of the coastal regions that have been rewarded by Pacific trade.

    The thing is, that whole model rests on assumptions about ecology and energy and population that are apparently hidden from China’s best minds. China’s aspirations appear to be falling short in critical ways in the Year of the Locust.

    I do not think it is an unwillingness to be a generous Hegemon that will do in us all, but rather the galloping collapse of the foundation of the Second Industrial Revolution’s oil and electricity-based economy in the polluted petri dish that it has made of the earth.

  4. KT Chong

    About two months ago when it became clear that Bernie would drop out of the primary, I decided to just not vote in November because I disliked BOTH Trump and Biden. Now, I am leaning more and more towards VOTING FOR TRUMP in November. It will be so satisfying to see the Democratic Party burn and all the neoliberals, MeToo hypocrites, SJW and Woke identitarians break down and cry in despair.

  5. Zachary Smith

    My grandma had a pithy remark which might apply here – “Cutting off your nose to spite your face”.

  6. Stirling S Newberry

    They still don’t learn: is was offered loans, at an exorbitant rate to pay for college. Jacking up charges for college is not a winning advantage. I rejected the loans – I can borrow for less than the Federal Government is charging. This is wrong. Federal Government should be less, not more.

    The baby boom and now the X’ers are morons.

  7. krake

    I don’t understand the violent hostility to emerging idenities. They are all by-products of masculinized whiteness*, and only the abolition of whiteness, which is hardly merely a structural challenge, will or can preface a society where identity is neither a necessary act of self-protection nor mandatory as self-creation in a mediated cultural mileu.

    * – It would perhaps be more sound and accurate to understand whiteness as the continuance of Anglo-Norman efforts to provide a foundation for parliamentary colonial empire and capitalist relations, by trying to gain the mantle and might of Rome for a mercantile and smallholder citizen base; but, few would follow and fewer have the time to understand. So, esp. in the States, ‘whiteness’ will and can do.

  8. Stirling S Newberry

    Because that not the cause, but not-white people think it is the cause. This sets up trouble with the people on the winning side profit from.

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