…is the US sharemarket roaring away – up 44% – while economic recovery prospects are grim?” ANZ’s Sharon Zollner’s answer on Tuesday was the Fed printing money, but worried markets were turning a blind eye to the bad news. The bad news hit today as the sharemarket nose-dived. Wolf Richter’s answer was more to Kim’s point: “Fed bails out the wealthy while America convulses in pain.”
His whole article is worth a read. Here are some bits:
In a Wall Street Journal/NBC poll out today, 80% of the respondents said they feel that the country is spiraling out of control.
So there are some huge multi-faceted problems that need to be grappled with, and that need to be resolved, and people are hurting, and they’re frustrated, and they’re angry, and many are unemployed, and others have jobs that don’t pay enough to meet the rising living expenses, and small businesses are on the ropes, and there’s going to be a lot of pain.
And what does the Federal Reserve do?
It printed $2.9 trillion since early March to bail out investors in highly leveraged hedge funds that were imploding, and to bail out investors in highly leveraged mortgage REITs that were imploding, and to bail out asset holders whose stocks were plunging, and speculators in the riskiest concoctions, and investors of all kinds, and to bail out asset holders of any kind – and the wealthier they were, the more they got – to make sure they don’t feel any of the pain.
That’s what the Fed is doing.
So the Fed printed $2.9 trillion since early March. That’s about $22,000 per household. For the bottom half of households, $22,000 would have helped a lot to get through the crisis.
But this money wasn’t spread to them. It was helicopter money for Wall Street. And it went on to multiply. And most of it ended up with a relatively small number of households. And their wealth increased by the trillions of dollars.
It’s a polemic. He goes on:
In central-bank lingo, this is called “moral hazard”: Bailing out the wealthy and asset holders, hedge funds, mortgage REITs, private equity firms, and huge risk takers, and it’s called “moral hazard” because it encourages this risky behavior because they know that they’re going to get a bailout when it hits the fan next time, and so they do the same thing again and take even greater risks, and it blows up again with even bigger consequences, and they get bailed out again with even more trillions.
Tens of millions of people are out of a job, and many people protest in the streets, seething with anger and frustration. And many of those that didn’t lose their jobs are living from paycheck-to-paycheck, while the fruits of their labor continually get eaten up by rising prices and rents and healthcare costs – the lucky ones that even have healthcare.
But the Fed bails out that concentration of wealth and power so they never have to feel the economic pain, so that they don’t have any skin in any crisis, and so that the wealth disparity continues to surge.
Its not the printing of money that’s the problem. If it went to supporting jobs with a job guarantee, providing a decent health care system, and fixing America’s run-down and obsolescent infrastructure, it would relieve a great deal of the pain that people are curently feeling. I’m not holding out hope – as summer goes on and Covid case numbers keep rising, things are going to get worse for the 99%.
Good on Kim Hill for asking the question though. I hope she keeps them coming.
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