For the third time in 20 years, the Fed has targeted the middle class for the benefit of the wealthy.
Don’t believe Fed lies. Its bailout of risky debt including junk bonds helps investors, not employees.
Once again, the Fed Punishes Prudence.
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.
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.
Almost Spot On
Authors Sam Long and Alexander Synkov are almost spot on.
What did they get wrong?
This trend did not begin in the wake of the 2007-09 financial crisis.. Rather it’s been an ongoing process.
Importantly, this is the third major acceleration in the process.
- The first major acceleration began in the wake of the dot-com bust when the Fed bailed out the lenders who made loans to worthless companies. Housing prices soared to the moon as the Fed stood by and watched. Bernanke denied there was a bubble. The transfer of wealth to the likes of companies like Countrywide Financial was massive.
- The Second acceleration was in response to the bust. For the second time, the Fed held rates too low to long. Asset prices went to the moon and speculation surpassed that of the housing bubble and the dot-com bubble.
- This preposterous entry into Junk bonds and other bailouts is the third major acceleration and the Fed had to bend some rules to do so. Buying junk bonds is illegal under its actual mandate.
Pole Vaulting the Boundaries
Some claim the Fed pushed the boundaries by buying junk bonds.
I suggest When you take illegal actions and enter numerous uncharted territories on balance sheet expansion, junk bonds, and bond ETFs you are not “pushing” the boundaries, you are pole vaulting over them.
Too Big to Fail
Note my post earlier today: Carnival Deemed Too Big to Fail, Rescued by the Fed.
Carnival needed money. The Fed became the lender of last resort.
Carnival could easily file for bankruptcy reorganization and reschedule debt payments.
One of my friends commented “This is just a play to save the equity, who are Trump’s friends.”OK but why would the Fed do this?
“Because he has appointed a ball-less group of wimps. It largely does what he wants. Particularly on a petty issue like this,” replied my friend.
The transfer of wealth from the middle class to the wealthy just accelerated.
What constitutes “too big to fail” keeps getting smaller and smaller.
Why Rob the Middle Class?
Some may be wondering why the Fed has targeted the middle class.
Because as Willie Sutton once replied when asked why he robbed banks, “Because that’s where the money is.”
The poor do not have any assets or money left to setal.
There Are No Temporary Measures, Just Permanent Lies
Under guise of virus support, the Fed Will Buy Junk Bonds, Lend to States to the tune of an additional $2.3 trillion in additional aid.
Dear Jerome Powell, please tell the truth. This is not virus support, it’s stock market support.
This new junk bond “tool” is now permanent.
Always remember, There Are No Temporary Measures, Just Permanent Lies.
Mish
I’m opposed to this because it looks to me like it’s at the expense of taxpayers. However, we do have a progressive tax system, which taxes the rich at a higher rate. I don’t quite see how it’s all or even mostly at the expense of the middle class. But, I am open to persuasion, because I do think this is awful on so many other levels.
It’s not at the expense of “taxpayers” narrowly defines. But rather at the expense of anyone who is, de facto, forced to transact and save in dollars. Yet is not receiving free money to buy bailout bonds.
That’s why cutting taxes, but not cutting spending; while making up for the shortfall by printing and borrowing and debasing, have been such a hit with the leeching classes ever since Reagan popularized it: It allows the leeches to preen around pretending that they are somehow useful life forms, that they are the ones “paying in”. Never mind that for every dollar they “pay in” the Fed first had to rob others of $3 by debasement, in order for the leeches to have anything to “pay in” with.
It’s not as if leeches create any value by themselves, after all, so whatever they have, must definitionally first be redistributed from others. That’s just basic arithmetic.
By the way you can blame the Fed or whatever system is in place. But the truth is this is what victims do. 35% of the country is doing better during coronavirus due to the understanding they have and the choices they made. My parents were part of the middle class and made bad choices at times. I was able to understand what they did wrong and improve my lot in life. We are the pilots of our lives.
The generation of Jews who lived through the 30s, were just really bad pilots of their lives, you see…..
This isn’t the 30s. We don’t live in that world anymore thankfully (not that I was around).
Being middle class is the middle class’s fault. You never get anywhere unless you understand how to make more money then you need. I say that as someone who was once part of the middle class but is now part of the top 2% of income. If you arent climbing up the income strata, then you are making the wrong choices.
You are a hoot.
Reminds me of Ben Carson when he ran for POTUS. Said ~ if you don’t like your position in life then get yourself into the top 10%.
Never mind that by DEFINITION only 10% can be in the top 10%.
If you are willing to throw the other 90% overboard, I feel sorry for you.
Yes, a truly imbecilic comment by Casual_Observer
Actually the opposite Tony. I help others where and when I can. I have never stepped on other people to do well. Just because I am willing to work hard and be good at something doesn’t mean I throw other people overboard. It is possible to do well in America and not be a bad guy. Yes it is !
By definition, only 2% of households can be in the top 2% of income at any point in time regardless of the choices people make. This is the kind of attitude that I often see from people who like to believe “I did it all on my own” and “your situation is all your own fault.” In some cases that is true, but the vast majority of the time it isn’t.
I didn’t do it on my own. I had help and help others along the way. It is nearly impossible in any other country to go from the middle class to the top 2% in 20 years or less. This is not a zero-sum economy like some other economies in the world.
I like to think of the thought experiment where the entire population of a nation is composed of clones of a single person.
The “system” still demands the same proportions of “haves” and “have nots”, the same small proportion of clones who do nothing truly productive except make financial “bets” and deals” and siphon all the wealth out of the “system” at the expense of the vast majority of clones who do anything at all productive that creates wealth within the “system”.
And none of the “positions” filled by the clones have anything whatsoever to do with the identical capabilities of the clones … it’s just where the “system” happens to “slot” them.
Replace the clones with individuals whose capabilities and other factors follow various forms of “bell-shaped curves” and the slotting is even more severe (but not entirely due to only the “system”) as the complexity of the “system” increases and requires more “capability” from the individuals to “play it” successfully.
what a stupid comment!
Don’t vote. It is a waste of time. You’re not going to change anything. Instead, spend the time that others spend on politics and candidates and learn what is going on. Then slowly begin to disengage from the system. Pull capital. Move way out and off the beaten path. Keep a low profile. Live your life. These people are evil. Everything they do is for their own benefit, not yours, not mine.
The Fed has not purchased any junk bonds. If someone can show an actual junk bond purchase, I would like to see it.
You are correct.
What has occurred is Federal Reserve + US Treasury have teamed up as co-partners in a SPV (special purpose vehicle). The SPV resides OUTSIDE the balance sheet of Federal Reserve. US Treasury ponied up the capital / equity (first loss position) with Federal Reserve as banker (with up to 10x of capital depending on asset purchased).
There have been no junk bonds bought. All that has been done is jawboning.
In that case, they have just paid others to buy them. By handing out enough money to ensure some of it even flows into junk bonds.
Either way, the bonds have been bought, and the population robbed via debasement to pay for them.
I’ve been waiting for my bailout check since 2009. My patience is running out.
It is what it is. Fed is trapped. Will do whatever it takes to keep system from collapsing. That means mitigating credit events, but they will happen anyway. Might as well play it.
The argument against that is that instead of allowing a steady refresh of investment by a form of creative destruction, instead you end up with a systemic corruption of values which might fail as a whole, or a warped over management of the economy and society that slowly becomes more authoritarian to cover its failures. People have different ideas to what is acceptable, and either way are generally too far removed from decision making to be able to do more than claim from whatever direction is offerred.
Excuse me Mish, but this is a bit of a too populist, black and white story ! The middle class, whatever that may be, by lack of alternatives, is also heavily invested in the markets (bonds and stock) so the bailouts, justified or not, might save a middle class ass or two…..
Indeed, some of the peasants must be allowed to move up, as it was in the days of the Roman Empire.
That the occasional lotto player wins, doesn’t make it “populist” to point out that state lotteries exist to transfer money from players to state governments.
It’s a beautiful thing to see the oligarchy looting the country while the rabble cheer. I hope the sheeple of this third rate country starve and die in poverty. It’s exactly what they deserve!
I disagree. This all started in 1984 when they decided to rescue the Continental Illinois bank, marking the first upward surge in stock prices, or arguably the second leg after the Mexican debt rescue in 1982. This was the start of financialization, derivatives wagging the dog by the tail, the Fed put, and the era marked by a newly coined term: “wealth creation”
Wealth creation was never about production, but about money castles.
If these actions are not really legal by the FED why doesn’t someone pose a legal challenge? Is this not possible? I would hope so. This could be considered the
full employment act for the legal profession.
Nonsense. This war on the middle class began in 1982. It is only now that the funny money rates approach zero that the emperor is discovered to be undressed.
Can you say Payroll Tax Cut? One way to start giving the middle class some of its money back. The Fed will not deviate from its course or mission. Ironic it will own a cruise line because the Fed is the ultimate Titanic. There is no turning back now the US will amass debits that will make Japan small again. Grab what you can who knows it might just keep you alive long enough to be rescued.
PS. Only one voice that I have heard payroll tax cut mentioned. I will give you a hint it was somewhere in-between hydroxychloroquine and Lysol comments!
Correct me if I’m wrong. Payroll taxes come under the purview of the IRS. The IRS comes under the purview of the Treasury Dept. The Treasury Dept comes under the purview of the Secretary who answers to the President. Since he mentioned a payroll Tax cut and we don’t have one or a suspension of taxes all together including a gasoline tax then what am I to conclude from that. I would say he’s talking out his ass again but that would require him removing a thumb.
You could be right. But I think it is a law and therefore it would take a vote by congress to change. If he could use an executive order he already would have, just my opinion (great campaign material too). There is no appetite in the legislative branch I have written both senators in my state not a word back on where they stand. No kickbacks to Wall Street on this type of bailout no loan or grants for Wall Street to collect their commissions. It’s a beautiful tool to reduce costs to employers as well a give money back to workers.
I argue that the term “middle class” is apologetic. The correct term is working class. Properly understood, the only class that produces anything of value is the working class; ergo, the only source of revenue is generated by and stolen from the working class. It can be no other way under this system.
This is also the reason why morals can only be found among the working class, never the rentier class or welfare class.
The world as presently constituted makes a lot more sense when understood this way.
Traditionally, the “working class” were those whose earnings derived from nothing aside from their labor. I.e, they didn’t own the land they worked, nor the tractor they used, nor even possessed much in the way of education nor non commodity skills in capital use which would induce someone to pay a specific one of them to use his capital.
The other classes still worked. They just owned their land and/or farm equipment, sowing machine, forge or whatever capital they could use to magnify the value they could create per hour of work. Or, if they didn’t own the capital per se, they possessed non commodity skills required to use if effectively, like say a surgeon or dentist; which also meant capital owners would bid for them to use their specific pieces of capital over others’, such that those workers were still able to command capital to magnify their income.
As societies get richer, more and more workers are either able to buy their own power tools and tractors, or obtain the skills to fly a plane.
It’s only financialization which has then set this process in reverse, by allowing privileged dilletantes to obtain free money with which to outbid people who work, for capital. Hence turning workers into indentured serfs and sharecroppers.
I definitely agree financialization has set the process in reverse. I don’t think it’s a coincidence working class stagnation and financialization occurred simultaneously. What do you think workers can do to reverse the situation in the current system?
For starters, end the FED and reinstitute real money. But at this moment in history would that cause more or less hardship?
It certainly would create more morality. But let’s face it, TPTB would rather die than give up control.
I think there’s a Nine Inch Nails song that covers that.
Perhaps reinstitution real money works, but it’s interesting that at the end of the 19th century it was financiers that wanted gold and workers and farmers, primarily debtors, who wanted looser money. Would another form of exploitation replace the fiat money system? I don’t know, but maybe it’s just the human condition.
Not buying things on credit? Not renting? The others such as insurance and banking seem a bit more difficult. Start a credit union for your own insurance? Let’s not kid ourselves, financialisation is very alluring in the now since you don’t have to wait a long time to buy something. You can have it immediately for an affordable monthly payment. Ideally also protest against bailouts?
You’re right, I think the combination of financialization and marketing is very alluring and people get in over their head. However, it’s functionally a sugar high when you don’t have the resources to cover expenses for even a week or two. It’s amazing though that it’s not just individuals, but corporations that have been so mismanaged they immediately need a bailout. I definitely oppose the bailouts because privatizing gains and socializing losses creates so many perverse incentives the system is bound to implode eventually and when it does, workers and people already on the edge will pay the biggest price.
“What do you think workers can do to reverse the situation in the current system?”
The basics:
End The Fed and ensure Gold being the only tender accepted by whatever government there is. As long as there exists a class of people who can, simply and without any effort nor competence, arbitrarily print themselves as much as they please of what workers have to work for, workers will never be able to afford anything at all, as the leeches will just print up another million and use that freshprint to outbid workers for everything.
No taxes on activity. Again, as long as a class of leeches, have unlimited access to spy on anything workers do, in order to raise government revenue, they can arbitrarily jig those taxes to favor leeches over workers. And what they can do, they will do. So now, workers work half the year, in order to ensure plantation owners who did nothing in return, have armed guards protecting their plantations, should some nigga get uppity.
Instead, tax claims of ownership. Most simply of just land and real estate. But also of IP, of shares of not-a-person entities and perhaps other things. Each of which requires a costly legal, court and policing system to maintain. Those who directly benefit from the ability to make, and have enforced for them, such claims, should pay for it. Not people who don’t, and who merely work.
When ending The Fed and switching to Gold; do it at $20/oz. Not at some inflated rate aimed at nothing but preserving the current status quo. At $20/oz, anyone with any debt at all, will be unable to service it. Hence Bankrupt. Hence has to turn over everything he owns. Which may sound bad, but is not as long as everyone else also has to at the same time. To see why, imagine an America where P1 owns everything, except P2-300mill each own one grain of sand. Then everything gets thrown into a big pile, noone has any money, and it is all firesold….. Pretty much everyone will be better off as a result. Except P1. And, since on account of The Fed, progressivism and financialization, P1 never earned any of what he now nominally owns, but were rather just handed it as loot stolen from the rest, this is not only a good outcome, but indeed an economically efficient one.
As a corollary to universal bankruptcy brought about by $20/oz legal tender Gold, governments will also go bankrupt. And anyone who lent them money will, as is proper, lose it all. Which, along with no access to simply print anymore, ensures government will be much more restricted going forward. Hence, smaller government. Which is also both good and economically efficient.
Do the above, and America will do what all free countries do: Thrive. And not only “America” in some abstract, flag waving sense, but indeed America as a simple collection of Americans. Pretty much all of whom will again be both better off almost immediately, but also get to live in a country that is getting wealthier again. Which America hasn’t for at least 5 decades. Which is, again, both good and economically efficient. As if the two really differ.
Thank you for the reply. Honestly, such a transition doesn’t scare me because I don’t have any debt and would end up better off than most. That probably isn’t fair though.
Yes Stuki, I agree — any truly productive member of society, not a rentier, paperpusher or leech, would count as “working class” regardless of wealth.
I’m not following… please someone explain how the Fed buying junk bonds is taking money from me (middle class)?? Will it make something more expensive? Will I see a tax raised? Something else?
Whatever is owned and bought by junk bond holders, aka everything in America by now, is not being firesold at prices you can afford.
But is instead retained, by the privileged and connected junk bond holders. Who then turns around and charge you usury rent for it.
They are distorting the interest that you would otherwise receive on savings
they are purchasing such unworthy assets with money that will be taken in future tax receipts; it is all paid for out of your labor
The holders of those junk bonds are probably not getting the actual market price for them, since if they holders could, they would not need the Fed. So the Fed is bailing them out. Where the fed gets the money is via various complicated and hidden and unreported schemes, but its just basically “money printing” or simply “credit creation” and Congress just stands by with their thumb in their mouth.
“When you see that in order to produce, you need to obtain permission from men who produce nothing – When you see that money is flowing to those who deal, not in goods, but in favors – When you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you – When you see corruption being rewarded and honesty becoming a self-sacrifice – You may know that your society is doomed.”
When using quotation marks, I would think it good form to inform who that smart person is and not assume we’re as smart and well-read as you so obviously are.
I’ve found it’s best not to attribute her quotes, otherwise many people won’t read it — because they’re too busy trying to feel hatred for an author they never read or understood in the first place.
You’re quite right! Rand’s concepts challenge both conventional “wisdom” and religious programming, which often causes strong and emotional reactions.
Which is exactly why I did NOT attrib.
The reader who doesn’t know, but wants to, can search for it…
While the middle class is getting boned (as usual) I find it hard to muster TOO much sympathy. They only stay angry for a short time before going back to sleep and pretending all is well. They’re going to keep getting shafted (schlonged?) until they stand up for themselves.
Too many people think they have an inalienable right to go through life sleepwalking because they “work hard” at an office somewhere. Each time a disruption happens they can’t wait to go back to obsessing over abortion, race, religion, gender, or any of the main wedge issues, or just vegging out to TV and sportsball. They need to learn to focus on what matters, and if it takes a great deal of pain to learn that lesson, so be it.
How about those guys holding “End the Fed” signs? Hey what happened to those guys anyway?
I’m starting to think Biden can win despite all his inadequacies and lack of mental acuity
Not that it’s really going matter either way but. Since when has adequacy or acuity been traits known to politicians. Lol
If Biden becomes president it will be the first time in a long time that the current president was not significantly more awful than the prior. It’s the little wins.
You are thinking correctly
I wouldn’t count any chickens before they hatch.
Check out the daily WH propaganda blast. THIS is what the base is going to see. THIS is what the fence sitters are going to see.
Your daily summary of news, events, and updates.
1600 Daily
April 27, 2020
An update on Coronavirus testing
America has tested more patients for Coronavirus than any other nation on Earth. That milestone is no accident: It resulted from our Federal Government leading the most aggressive testing ramp-up in history.
Early and strong action made the difference. After the CDC published the genetic sequence for the first domestic case of Coronavirus, the Trump Administration mobilized a massive private-sector response. Since then, the FDA has worked with test developers across the country on emergency use authorizations (EUAs) related to virus detection.
….
Middle class culture, any culture, can only stand if it is rewarded. In prior times the middle class culture was fundamentally supported by the upper classes, who invested in America, creating vast wealth.
They modeled sobriety, hard-work, risk and reward. The working classes modeled the behavior through church and labor unions, standing together for each other and nation.
The wealthy have abandoned America, and the working classes have abandoned religion, unions, and each other. Into that void steps cultural anarchy.
Our culture requires hard-work, and discipline. It requires accountability, primarily of the wealthy. I tire of articles that lament the loss of culture without holding those accountable who have abandoned their responsibilities.
Globalization and outsourcing pillaged the working class for the benefit of the middle class and affluent. Since the working class is largely tapped out, the pillaging is just moving further up the ladder. At a certain point a critical mass of people will realize just how much they’ve been screwed by both parties. I doubt it ends well. Then again, bread ($1,200) and circuses (Netflix) may buy the establishment more time than I can imagine.
“Globalization and outsourcing pillaged the working class for the benefit of the middle class and affluent.”
Not “globalization”, nor “outsourcing”, nor hobgoblins nor anything else complicated.
The ones who pillaged the working class, are the ones who got rich without doing any productive work. Simple as that. Basic arithmetic. Not weird, dark forces which “the next Dear Leader”, who will be “the good one,” must put on his rubber suit and fight against while “we” stand by and cheer.
Just the guys in a nicer zipcode who made money off of “assets.” That simple.
And the processes by which they did so, is just as simple: Debasement by The Fed, “Laws” enacted by Dear Leader, and taxes on the working class’ paycheck, and on everything they bought with what was left of their paycheck. Not mean bat eating Chinamen and scary Mexican Drug Cartels. Just the regime supporter a zipcode over, whose assets were pumped up, and who the working class is paying usury rent to, and is being taxed to fund property protection for.
Not exactly. I agree there are guys in nicer zipcodes making money off of “assets.” However, when you work at the Carrier factory in Indiana and you’re told your job is going to Veracruz because it’s a “competitive environment,” that’s globalization. If an entire department at a company is laid off and the jobs moved to India, that’s outsourcing. When you multiply these events across countless communities with production going all over the third world, that’s the globalization we’ve been fed. It’s really that simple. Your “simple” explanation ignores this reality, which has absolutely nothing to do with “mean bat eating Chinamen and scary Mexican Drug Cartels.” Where did that nonsense even come from?
Something of both.
The move of labour going abroad is serviced by both deficit and monetary inflation, an inflation that has gone on globally, and also involves direct investment from abroad into our countries, and so does not register in the foreign exchange.
The western national workspace has moved towards services, the money to pay that (and away from production) has been via finance and asset inflation, notice the continual steady lowering of rates for decades now, to the zero bound we are at. Into this has been thrown social benefits, whether foodstamps or whatever others exist. The whole shape is asymmetric pyramidal, with the elite at the top, a shrinking upper middle class that includes older generation, a stagnant or sinking large middle class, and a poorer expanding working class. The younger generations are low on that scale.
However, and this is the catch, people in the US as a whole are well off…compared to China or India say. They don’t want to do the difficult labour, they don’t want to do factory work, it generally suits them to buy cheap trashy imported goods that they can afford more of, and to try to climb the ladder of success by using easy finance.
So, until this cycle of de-quality of values is interrupted, it is just going to be a lot of people complaining selfishly because they themselves do not wish to pay the real cost of the foreign labour they would shun, and a number of people who know or remember what an honest society looks/ed like shaking their head at it all.
This is probably part of the next phase of the adjustment we are experiencing now, with the pandemic new civil norms are going to be introduced, new social format installed, more even but more controlling, levelled but directed by a system that keeps people that way.
“They don’t want to do the difficult labour, they don’t want to do factory work, it generally suits them to buy cheap trashy imported goods that they can afford more of, and to try to climb the ladder of success by using easy finance.”
I agree to a certain extent with your sentiment, but plenty of Americans are willing to do difficult work and factory work. They just want to paid enough to have a decent life. The factories weren’t moved to third world countries due to a lack of workers. They were moved because the wages paid in third world countries offered enormous profits for corporate executives and investors at the expense of workers.
As decent paying jobs became scarcer for low and mid-skill working Americans, they competed for the jobs that remained depressing wages even further. Immigration exacerbated the problem of depressed wages. That’s why Trump’s tariffs and immigration rhetoric resonated with so many workers in 2016. I didn’t vote for Trump, but his position on those issues, which broke with the consensus of the elites in both parties, is a large, if not the main, reason why he was elected.
I am old enough to remember what an honest society looks like before being completely corrupted by financialization. Workers can actually be paid enough to support a family and own a home. My father managed to do it in Southern California driving a cement truck for 28 years from 1970 to 1998. If he had been even 10 years younger his career would have been completely different. As it was, his pay was cut from $17.78 to $13.00/hr between 1990 and his retirement in 1998. The work was the same, so someone else was getting the “wealth” being created. A rebalancing in favor of workers to some degree is needed.
That is true. It is funny though how certain work just seems to evaporate, I think that maybe once part of a local economy is lost, a whole load more fails also.
The point I was trying to make though is that society at least inadvertently takes part in this. People don’t much boycott foreign goods or demand local goods, they tend to vote with their wallet, and I expect that is partly self fulfilling because the more wealth they transfer abroad the less work they have, the less earnings, the less they are willing to spend, and there finance steps in.
If you take a survey of modern western population, and you asked the younger generation would they accept a long steady job in relatively unskilled labour for the security of say home purchase and adequate lifestyle, a lot would say no (though some western countries still organise and prime this direction) . On the other hand workers do go where there is adequate pay when times are difficult, and wherever there is good pay when times are not so hard.
I think a lot of this is cultural also, you interrupt a way of life and people forget it over time. An example I used previously was migration to cities from rural areas… and they generally don’t return to their village ways afterwards. I know that even now in most countries you can find farm labour and soon afford a property outright plus a way of life better than was had say by labour in say the sixties or seventies – but the sentiment in the western population is not there for that in general now – it is not their goal, they are attracted to their current or other realities.
Short of placing trade barriers to protect national economy, what is anything to be done ? Under a hard monetary standard this offshoring would not stand though, at least not without allowing foreign purchase into a country, or a deflation in prices. A price deflation would not be bad – workers earn less, prices go down until there is a balance. This did not happen though, government/fed stepped in and financed assets, and financed welfare, creating a new model of competition where access was immediate but the costs endless, one where a small percentage gain well beyond their share in profit.
The reason jobs are going to Veracruz and India is because Americans cannot afford to perform them at a competitive wage. Not because of “globalization.”
And the reason American workers cannot perform jobs at competitive wages, is because in addition to feeding themselves, they are also carrying the entirety of the growing mountain of FIRE and other leeches on their shoulders. Again, not because of “globalization.”
Also, the reason is specifically NOT that Indians and Mexicans are willing to work for “slave wages,” nor for less than Americans, even though they no doubt are. The reason for this willingness is that in those countries, there is not enough capital per worker, to allow workers to generate enough value to demand higher wages. A mechanized harvester driver is a better hire at almost any wage, than some dude handpicking wheat.
As opposed to India and even Mexico, America used to be a first world country. One where workers had access to more capital than the average stone ager. Which allowed him to add more value per hour. Hence was worth hiring for higher wages.
None of that capital has been stolen by Indians and Mexicans. Instead, it has been handed to idle, connected dilletantes. Then either burned, in order to allow Fed enabled FIRE leeches to consume more, aka live richer. Or what hasn’t been burned, is now controlled by dilettantes who is destroying it. Like the yahoos at Boeing who now are reduced to building things that fall out of the sky, rather than fly. In both cases, the dilletantes have been handed the capital without adding any value themselves. Instead having it transferred to them, from the dwindling number who are still out there bothering to do productive, value adding work.
You cannot have people “making money of their house”, without someone else having to work to create what they make. A house sitting idle, does not add value. The mold and roaches don’t do valuable work. Ergo, every penny of value someone “makes” off there house, has to be created by someone else. Then be stolen from the guy who made it, to be handed out to the privileged guy sitting idly on the couch as the roaches gnaw away.
In order for working people to not only feed themselves in something resembling at least 2nd world standards, AND also feed Warren Buffet and George Soros and Bloomberg and Trump and the rest, all the way down to some lowly home flipper, the workers would need to be paid a wage which renders him uncompetitive. And ever more so, as more and more of the capital which once made America’s working people the highest paid in the world, is either burned, or blatantly mismanaged by the idle leeching classes.
None of this has anything to do with “globalization.” End The Fed, use Gold, end activity taxes, end zoning and land use laws and other arrangements existing solely to facilitate rent seeking by the privileged and idle, end ambulance chaser shakedowns over anything other than alleged breached of voluntarily entered into contracts… aka make America into something resembling a free country again, and there’s not a company anywhere who wouldn’t rather set up shop here than in some third world corruptopia. And each of those companies, would then have no choice but to bid for value adding labor, hence driving up wages. Virtually all of which wages would remain with the guy who made it. Instead of being pilfered off by some gigantic, ever growing superstructure of leeches adding no value at all, yet somehow being handed the lions share of the value others add.
I agree that American workers’ production is “being pilfered off by some gigantic, ever growing superstructure of leeches adding no value at all…” I also agree with your summation of “value” in something like housing. Inflated prices benefit current owners by giving them a larger claim against the labor of future owners.
Where I disagree with you on “globalization” is incentives for corporations to move production abroad. Even companies that don’t move, often use the threat in order to keep wages down. NAFTA, for example, solves the “corruptopia” problem you identify. NAFTA gave American corporations enforceable property rights in Mexico and protected them from expropriation of their investment. Suddenly it made sense to invest “in some third world corruptopia” or at least threaten to move to keep wages down. I think NAFTA was primarily about maximizing the gains and profits of those you describe as leeches adding no value.
“Did you ever think one day you’d live through a global pandemic, with a doomsday virus, and the Joker is president? Sounds like a bad made-for-TV scifi movie.”
― Oliver Markus Malloy
Middle class? What are you talking about? That concept disappeared a long time ago. There’s only the top 10% and the bottom 90%.
Royal Caribbean is incorporated in Liberia, and Norwegian Cruise Lines is incorporated in Bermuda. As of April 1st they were not getting a bailout, now courtesy of the US, they are… just like magic. USA, USA, USA! https://www.nbcnews.com/business/business-news/most-cruise-lines-don-t-pay-taxes-u-s-just-n1172496
“The first major acceleration began in the wake of the dot-com bust when the Fed bailed out the lenders who made loans to worthless companies. Housing prices soared to the moon as the Fed stood by and watched.”
The FED stood by and cheered. Paul Krugman noted someone who said that Greenspan needed a housing bubble to recover the economy from the .com bubble.
Voila- Bush Jr. announced the Ownership Society program. Later on, Greenspan thanked bankers for getting people into homes they otherwise could not afford.
Prior to Greenspan thanking the bankers, the FBI had warned congress of massive mortgage fraud.
It doesn’t take a brain surgeon to put the dots together.
i am not being facetious above or below.
is this not the fed’s raison d’être?
When do people say enough? I keep thinking the majority of ill will in this country is manufactured in concert by the wealthy in both parties. Just look at all the stimulus allocated so far, the proles are still waiting for their $1,200 …
“When do people say enough? “
Indoctrination obviously works. In Latin America, people still believe the next Peron, will be the “good Dear Leader”, the one who finally undoes all the horrors the hundreds of preceding ones have perpetrated.
The US is no different from Latin America by now: Clueless dunces cheering for one Dear Leader or the other, as he keeps robbing and raping them and their kids. Ever so happy, as long as he promises to rob their neighbor even harder and while using less lube.
Unfortunately sooner than we think.
People are starting to realize they are poor it the expense of the rich. If we ever get over this whole R and D the outlook near term is revolution.
Internet and video games are still running. Doubt they cry uncle very soon. Sheep being led to the slaughter…
The FEDs actions, deplorable as they are, are trivial to the crimes against humanity of this hysterical lockdown.
I’d say the exact opposite. The lockdowns themselves could end tomorrow and most people would still be scared to go out much. People aren’t even going to the emergency room when they have heart attacks! The virus has shut down the economy, but unclear to what extent the lockdowns have exacerbated that.
Meanwhile, gov is pulling off the greatest theft in history … with hardly a whimper heard from the victims.
“The virus has shut down the economy”. The virus did not shut down the economy, the politicians did. Whitmer wants Michigan shut down till June, only because she can’t shut it down till December. Hospitals are now in trouble across the entire state as are doctors offices. What a convenient way to roll out the red carpet to implement national health care.
The gov edicts sped up the social distancing and self-isolation that people are now doing. But dropping the edicts wouldn’t erase all of that. Social distancing is here to stay for a while, government-enforced or not.
No.
No the lockdown isn’t as bad as what the financial industry is doing to a large (although getting smaller) percentage of our country’s population. And you’ve been duped into making a big deal about the lockdown while TPTB pick your pockets clean. Prestidigitation at its best!
Ridiculous. The economy was already zombified long before “coronavirus” became a household word. All the virus (including the reaction to it) has done is accelerate what was already happening.
Lockdown hysteria is pathetic.
How’s the saying go, privatize the profits, socialize the risk…whatever.
I always hoped we learned lessons in 2008. Guess that was foolish.
They did learn a lot from 2008.
Stock market is up. Banks are bailed out. Bond holders are happy. They were quick on this one.
What sucks is this is just the first round.
Round two will be where the real money printed.