Showing posts with label Federal Reserve Bank. Show all posts
Showing posts with label Federal Reserve Bank. Show all posts

Thursday, August 6, 2020

A financial tsunami is coming to sweep away our huckster economy: Time to scramble to high ground

I confess I have always been on the lookout for disaster, and so far, I've never experienced one.

As a practicing lawyer years ago, I was drinking a beer with one of my law partners in a harborside bar in Juneau, Alaska.  We happened to catch a breaking news story on the bar's television about an earthquake out in the Pacific Ocean. The reporter mentioned the possibility of a tsunami hitting Hawaii or some other unspecified place.

I told my associate we were leaving the bar that very minute to find high ground. He could barely conceal his mirth, but I was his senior at our law firm, and he dutifully followed me out the door, leaving his half-consumed beer on the table.

There was no tsunami, it turned out, and I admit that I overreacted. But I had a vision of being buried under a wall of cold Pacific Ocean water pouring through the streets of Juneau. I did not want to die that way.

We know, however, that catastrophes happen from time to time. The Holocaust, for example.  Some people saw it coming and escaped before the Nazis showed up, and some waited until the goons beat down their front door.

In Night, Elie Weisel's personal memoir of the Holocaust, Weisel told the story of Moishe,  a neighbor who lived in Sighet, a Jewish village in Hungary. The Nazis arrested Moishe first be because he was a foreign Jew. The Hungarian police rounded him up with other Jews and shipped them to Poland in cattle cars. There the Gestapo took over and transported the Jews to an extermination site.  The prisoners were then forced to dig their own graves, and then they were shot one by one.   Moishe escaped, however, and came back to Sighet to warn his neighbors about what he had witnessed.

Nobody believed him. It was just too incredible.  The Nazis would never slaughter civilians wholesale, they reasoned. But of course, they were wrong.

On the other hand, some people can see the future clearly in all its horror. William Shirer was a news correspondent in Germany as the Nazis came to power.  Shirer's wife was Austrian, and she gave birth to her first child in a Vienna hospital. As it happened, she was in the maternity ward when the Nazis invaded Austria. A Jewish woman in a room across the hall heard the news and knew what it meant. She jumped out a window, killing herself and her newborn baby.

For our own sake and the sakes of our family and loved ones, we have a duty not to lull ourselves into complacency during a time when an unthinkable disaster looms on the horizon.  And we are now in such a time.

The hatred toward our President has not abated since the 2016 election. It has intensified. The Democrats and Republicans are at each other's throat, and they've turned a medical pandemic into a political event.

I don't think it will matter who wins the November election. Either way, Americans are screwed. The Federal Reserve Bank is propping up the stock market to postpone an economic calamity, but that can't go on forever. The market will crash soon,  probably in less than a year.

Then we will know who acted wisely as the storm built on the far horizon and who will lose everything. And the people who did this to us--the crooks on Wall Street and their corporate cronies--will still be living large because they know the party is over and are already taking steps to preserve their wealth.

When the economy collapses, the oligarchs will be drinking mai tais in Costa Rica. The rest of us will be scrambling to pay our mortgages--and we will be damned lucky if we don't lose more than our homes.


Monday, June 29, 2020

Coronavirus update: The Fed bought $428 million of corporate debt while distressed student-loan debtors get diddly squat

Perhaps you have noticed, as I have, that a high percentage of the George Floyd protestors are young White people.

 Youthful White men and women helped pull the ropes that brought down statues of Confederate figures across the South. And it is Millenials--White Millenials--who joined in the vandalism and destruction that damaged many American cities.

Why is that? Are White protestors merely standing in solidarity with their Black brothers and sisters over the residue of racism in the United States? Or do they have their own grievances?

I think it is both. In this season of discontent, we should remember how many Americans have been thrown out of work--tens of millions.  And we should never forget that 45 million Americans--more young than old--owe $1.7 trillion in student debt, and only about half can pay it back.

This nation has been in lockdown for four months now due to the coronavirus epidemic.  Public employees--professors, teachers, administrators, etc.--are still getting paid.  Workers in the private sector have been laid off by the millions, especially in the service industry. And many of these unemployed workers have student loans.

What has our federal government done to assist laid-off student-loan debtors?  Diddly squat.  The Department of Education has granted a brief reprieve from making monthly loan payments and is abstaining from charging interest, but that is about it.

Oh, yes, DOE said it would stop collection efforts against defaulted college-loan borrowers until the coronavirus crisis had passed. But last May, DOE was sued for allowing employers to continue collection efforts.

Meanwhile, the Federal Reserve Bank is buying up corporate debt--over $400 million. So far, the Fed has bought corporate debt owned by Berkshire Hathaway Energy, Coca-Cola, AT&T, Boeing, Exxon-Mobile, Ford and Walmart. And it has distributed more than $350 million in forgivable loans to businesses that promise to maintain their payrolls.

Who has benefited from the Fed's helicopter money over the last few months?  Corporate executives and corporate stockholders, that's who.  And--in case Fed Chair Jeremy Powell hasn't noticed--the people protesting on America's streets don't own stock.

I don't mean to question the motives of White protestors who join the Black Lives Matter demonstrations. I feel most are expressing real and legitimate anger about race relations in the United States.

But I also believe that White protestors feel a kinship with Black protestors on economic issues and consider themselves to be fellow victims of corporate America.  And I agree with them about that.

Many White demonstrators have racked up thousands of dollars in student debt and are not holding down jobs that will allow them to pay back what they owe. Some have come to realize that their college education was way too expensive and didn't prepare them for decent jobs. 

Now, these student-loan debtors are out of work and struggling to make their loan payments. They realize that our federal government has been spewing out billions of dollars to corporations to help them deal with the coronavirus while it has done virtually nothing for distressed college borrowers.

They are angry. I would be angry too--very, very angry.