All this financial talk is over most people’s heads. That is why the financial classes get away with their crimes. To understand the crime requires learning a new language: “Fed balance sheet,” “deflationary spiral,” “stock buy backs,” etc.
What the average Joe doesn’t understand is that the economy was intentionally crashed under the guise of a viral epidemic, then Congress passes laws giving the big companies billions, so no harm, no foul FOR THEM!
The lenders then have their bad debts (non-performing loans in default or foreclosed) taken off their accounting books and placed on the FEDERAL RESERVE’s balance sheet ($12 trillion now). Don’t you wish you had an uncle who would take all the debts off your accounting books and place them on his ledger so you falsely looked profitable?
So, there is no incentive to stop doling out home loans to people who can’t afford to buy a house. What do you do when nobody can make their house payment? Biowarfare and Terrorism Buy New $12.95 (as of 04:59 EDT - Details)
Now the banks will come back and buy your home cheaply and own everything — no asset-based wealth for the masses! Everybody becomes a renter. Your bank becomes your landlord. The plundering of the so-called middle class.
The small businessman is offered two months of payroll to keep workers on the job, but THERE ARE NO CUSTOMERS! Who thought this one up? They aren’t even allowed to go to your shop. THIS IS BAILOUT INSANITY?
The cost of an 0.0003% risk of dying from a coronavirus is costing you all your wealth and savings. Unless you are Black, or reside in a nursing home, your chance of dying from the coronavirus is remote (0.00001 or 1 in 100,000). But you must stay indoors, away from sunlight, and experience a decline in your immunity and develop mental depression from the lack of vitamin D, and the death count never goes down.
- Insulating the stock market from the economy does so at the cost of human life. The consumer economy will collapse while the stock market rises.
- All this bailout has done almost nothing to put food on people’s plates, or assuage the anxieties of small business owners,
- Paying workers more money in unemployment benefits than they earned in wages, creates a perverse system of incentives.
CHAMATH PALIHAPITIYA Talks About Making Main Street A Priority Instead Of Insulating Wall Street From The Economy
Yes, we’ve insulated stock market from the economy so it is just fine. Those are the priorities.
Human life is not. Main Street is not. Consumer economy will falter while stock market rises.
Social Capital founder and former Facebook exec Chamath Palihapitiya joined the hosts of CNBC’s “Squawk Box” for an interview Tuesday morning where he warned that the Fed’s coronavirus response will create serious long-term problems for the American economy.
Chamath started the interview by going all-in on the Fed and the White House’s response to the economic crisis caused by the coronavirus, skewering programs like ‘PPP’ for funneling money to companies that didn’t really need it and once again bashing the Fed for once again pumping up asset prices while placing Main Street at immense risk.
“There should be no doubt now that we’ve completely divorced the economy from stock and bond markets…” Palihapitiya warned.
The end result of this trend, he added, will be a “deflationary supercycle” as the Fed’s abuses come back to haunt the American economy and the dollar.
“All this money going in to prop of companies – what you are going to start or accelerate is a really bad deflationary super cycle.”
“There should be no doubt now that we have completely divorced the economy from the stock and bond markets,” says @Chamath. “All this money going in to prop of companies–what you are going to start or accelerate is a really bad deflationary super cycle.” Trumpocalypse: The End... Best Price: $13.90 Buy New $15.99 (as of 04:55 EDT - Details)
With the Fed’s balance sheet well on its way to $12 trillion by year’s end, levels that were deemed to be unfathomable just months ago, Palihapitiya reiterated that the rebound in equity markets has done almost nothing to put food on people’s plates, or assuage the anxieties of small business owners, as an NFIB reportreleased earlier would suggest.
“Asset inflation does not solve income disparity. It actually doesn’t solve full employment. It doesn’t do any of the things we need it to do for it to be a robust economy. What it does is it allow people who play in the financial markets to make money,” says @chamath.
Exactly how might this “deflationary spiral” happen? The former Facebook executive explains that by doling out money to massive corporations that have spent the last 10 years borrowing money to buy back stock, while paying workers more money in unemployment benefits than they earned in wages, creates a perverse system of incentives that, once the crisis has ended, could create the same economic dynamic that played out in Japan during the 1990s.
With the flood of cheap money, the financially shell-shocked consumers will save more, preventing the consumer-driven economy from generating the roaring growth needed to compensate for the crisis, while leaving the US in a kind of limbo as growth slows, prices fall, savings rise (despite rates remaining extraordinarily low, or negative) and productivity lapses while employment never really recovers.
The best example of this is, of course, Japan. We’d note that Zero Hedge has been warning about the “Japanification” of the US economy and monetary policy for some time).
“If you don’t break this cycle and teach a new pattern of behavior, we’re going to be looking at a Japanese-style deflationary period,” says @chamath on the Fed’s actions during the crisis.