by Ramin Mazaheri for The Saker Blog
Why do people not grasp that economic math is as relentless as epidemiology math?
Of course the US doesn’t have a curve but just a line going straight up: they are obese, have terrible health care, weakened resistance capabilities due to constant terror over physical/judicial/fiscal/employer harm, etc. These are things which needed to be fixed prior to the coronavirus but weren’t – however, we simply cannot stick our heads in the sand for 18 months until corona passes and falsely insist that these societal plagues aren’t deadly.
I’m not going to perseverate on that. Either you want to discuss multi-layered reality, or you want to go back to screaming in panic about how corona will kill us all. Frankly: many of you have been a panic-spreading menace and belong in the 1st grade. For those of us trying to behave like adults in charge amid justified health fears – this article will show the scope of the economic problems faced/caused by the coronavirus global economic lockdown.
Where to start… well, it’s not like there hasn’t been “innovations” in high finance since 2008. Those subprime mortgage bundled securities which you may recall caused such a problem? They’ve since been applied to credit debt, student loan debt, car debt, etc. Why? Because they make high finance money in a Western system which combats regulation. The suckers will lose, the poor will pay and the rich ones with clout will get bailed out – if you don’t recognise this as “Capitalism with Western characteristics” you must spend all your time with the panicked first-graders hoping someone with big boy pants will save you.
The US is especially prone to panic, probably because they have not experienced wartime conditions on their soil since 1865. Psychologically, they don’t know just how bad it can get and by that I mean that they are incapable of making peace with the fact that death and pain are simply unavoidable – a result of this is that they repeatedly and hysterically (Y2K, 9/11) assume the absolute worst and doomsday prep at psychotic levels. Their soccer moms are on Facebook declaring War on Dying while hubby dutifully stocks up on ammo.
Western Mainstream Media journalists insist the corona lockdown is the right move, and that the economic recovery will be quick. I disagree and propose a simple formula: the longer this lockdown panic lasts, the longer the economic recovery will take.
Who needs a bailout in the West? Wall Street, Main Street, the County Seat, State Capitol Plaza and Corporate Circle
The St. Louis US Fed predicts 30% unemployment and 50% of the economy at a standstill by the end of the June. We need to realise that the US is a neo-imperial country in that for the majority of its constituents the economy resembles a Third World nation – their inequality and instability levels are far higher than in Europe, China, Iran, South Korea, etc, but these are masked by larger overall economic output. So in both the US and the Third World we are talking about this reality of mass unemployment, mass poverty and mass lack of health care.
We should also predict mass homelessness: Fake-leftist Barry Obama’s first effective veto was on a plan to prevent foreclosures, so we should imagine that Trump will do the same. Americans with federally-backed loans have not been given a payment holiday but merely a deferment – they still have to pay back all that rent, job or no job. Americans with private loans – you are at the mercy of your debtor. The housing market mayhem will certainly arrive well before November.
This is a good time to discuss the time frame for economic chaos – all I can say is: well before November, but weeks not months. This financial crisis – which is being self-induced – is like wildfire. Unlike in 2008, which did not fully hit Europe until 2012, this is not taking years and there is absolutely no sporadic reprieves of good news.
Insert the West’s phony-yet-reborn conscience – the subject of my first article on corona – nagging at you here. Sure, people are being tragically struck down, and the majority of them are being felled at the prime age of around 80. But here’s the thing:
Mary Waitress has no income, no job, no health care and a mortgage, condo dues, two kids in day care, an underemployed ex-husband, a Mom in a nursing home and a government which couldn’t have cared less about any of that. Where has your conscience been for poor paycheck-to-paycheck Mary, I fairly ask?
Households – let’s very optimistically say 15 million of them by August – will thus go bankrupt first. From the US to France the West has consumer economies, with no savings and huge debt. And this will cause banks (debtors) to go bust; these are Western capitalist banks, with no savings thanks to stock buybacks, risky investments and no oversight. If, say, a quarter of a bank’s clients cannot pay then undercapitalised, over-leveraged Western banks will go bust because both houses and banks are fundamentally weak and over-leveraged — it’s that simple. Corona doesn’t change this nor supersede this – it merely is a layer added on to it.
So let’s give the unemployed Americans a People’s QE. Sure. All it took was Corona-chaos to get people $15/hour – the bailout is $600/week for 4 months (before taxes). However, this is not as good as it looks – the average jobless benefit was $400/month in the US. At first everyone is going to save this and not put it in the economy, due to the current feeling of instability (I’m not paying my rent – are you?); eventually, they will run out of savings and use this money. That influx of money, combined with the mass printing of this Quantitative Easing 5 (which will be followed by more QE), will cause prices to increase. The West is not Iran – they don’t believe in price controls (again, because they don’t know how bad things can get and thus have strange values). So we can predict that this $600 in July is not going to be like $600 in March for certain key, in-demand goods like food.
Other goods will plummet in value, like your house. Nobody is going to buy a house in this new corona-economy; you can’t even hold an open house to sell it.
Nobody is going to build a house, either. If you have a friend who is a construction worker, guess what? You have an unemployed friend. How can a construction worker work safely but still be six feet from his co-worker? Didn’t the doctors on CNN figure that one out when they shamed everyone into a shutdown?
If you have a friend who owns a small business in the US, then you have a friend who is busy on the computer, as the $400 billion government subsidy program went on-line Friday. Why am I so sure he is dealing with the crashes, slow service and policy glitches everyone expects? Because half of US small businesses have less than two weeks of cash on hand. However, don’t expect miracles – during the 2007-9 recession small businesses suffered 90% of the net job loss. They got nothing at all back then, unlike this time, but the same logic applies as with households and banks: if you don’t have savings now, your solvency prospects are just terrible as long as the lockdown lasts. Your prospects are also terrible for after the lockdown: assuming the economy does not immediately snap-back but restarts just a tad bit unevenly for a few months, then businesses are going to burn what inadequate amount of savings they have as they try to hold on. Many will not be able to. Amazon, man… they are going to just clean up market share in this crisis.
Even if small businesses get some government “largesse”, many are going to go bust – again – for as long as the panic lasts: people are getting progressively risk-averse and won’t spend. The idea that people snap back psychologically from a protracted crisis only applies to the sociopathic. I guess the CNN doctors will just tell us, “It’s ok now – go spend,” and everyone will listen? I doubt it – economic behavior patterns are being drastically, drastically altered. Free marketeers think some not-only-unknown-but-also-benevolent law governs economic behavior – very often that law is hysteria, illogic and magical thinking. But it’s also good sense – haven’t you recently put off buying something because of worries over the future? Some people might even like to keep working their “Corona victory gardens”?
Got a friend who works for a big corporation? It’s probably a zombie one (or does that only exist in China?): one in six U.S. companies is now a zombie, meaning their interest expenses exceed their earnings before interest and taxes. Non-financial corporate debt is almost half of GDP, at nearly $10 trillion. Across the West short-term corporate liabilities have become worse than pre-crisis levels – they have been borrowing to meet them. Demand necessarily plunges due to a global economic lockdown – what on earth is going to increase demand and not inflame Western corporate fiscal problems? Corporations with low credit ratings won’t even sniff a government bailout dollar – why would they be prioritised? The reality is that QE will not arrive fast enough for many middling-healthy corporations – private banks and hedge funds will shut them down, strip them for parts and send more workers to the unemployment ranks – the Austrian schools will be delighted. Or do you think the trend from this headline from as recently as February will continue: Junk bond scare is rising: ‘No one cares. People are buying everything’. People care now – no one is buying corporate bonds to finance them (except the US government), and the longer the corona panic and economic pain then the longer nobody buys them. If you were like Iran, where the government has not just a controlling share (20%) but a majority share in every medium and large industry… you wouldn’t have this problem/financing concern.
As I always stress, the economic reality is that the government is the biggest economic player in any economy – socialists try to take advantage of this reality for the people’s benefit, whereas neoliberals try to deny that it exists (while doing their best to cozy up to the world’s largest employer, the Pentagon). So how are local governments going to do? God bless federalism and damn French centralism, right? The smallest US state, Rhode Island, says they will be out of money in “weeks”; bigger states like Illinois were already just one notch above a junk rating. Their borrowing costs will surely surge; a parallel, compounding trend is that in the week ending March 18 investors pulled from municipal bond funds three times the previous record withdrawal. Of course, with no economic activity local governments will also see drastically reduced tax revenue – duh. I’m sure epidemiologists spend much of their non-lab time considering a lockdown’s effect on municipal finances.
Again, consumer psychology applies not just to you and me and Waitress Mary but Fat Cat Financier – nobody in high finance is buying debt to provide funding now (and probably for some time), they are all holding onto cash and trying to find gold. The crisis will surely finally prove that Bitcoin is a stable, anti-inflation store of value, as predicted. But how can anyone – a salesman, for example – get out and try and lobby for any help in any of these sectors when everyone is forced into lockdown?
So are we now clear on who needs a bailout in the West: Wall Street, Main Street, the County Seat, State Capitol Plaza and Corporate Circle. These problems were already lurking just under the surface, but the West is choosing to not only set off all this pain but to exacerbate it over corona deaths?
And what is a bailout in the West? It is not a debt jubilee, it is merely more loans, after all. And many with totally unIslamic interest rates! That’s what makes the West’s economic “solutions” so insane to Islamic finance and certainly to Islamic socialism….
These economic facts are entirely predictable – this WILL be the result of a Global Corona Lockdown. The “snap-back” is thus more like 2-3 years, not 2-3 weeks.
Your Western conscience has kicked backed in: “But it’s not just a flu, it’s serious, Ramin.” I know it is! I also know that global corona deaths (65,000 at time of writing) is only 75% the number of deaths caused by the Saudi-ordered, Western-supplied starvation in Yemen. Corona deaths may be bad, but the ancient Greeks said starvation was the worst way to go. And that’s just the number of deaths of Yemeni children -nobody knows the adult death toll. Do the soccer Moms and Fauci not know this was an actual thing about Yemen? But hey – that’s what they get for being Muslims, right? What’s worse – they’re half Shia. What’s worse – the Houthis are socialist-inspired. What these Yemeni children need to do to get Western attention is become 90-year olds with cancer and corona.
Do you want other examples of mass death currently? I’ll move on….
When do you want me to stop, economically? How long should I make this article?
Should I talk about other industries and nations? Is there room in your daily amount of corona panic to bring up that a corona economic shut down is going shut down not just your rich-person’s farmer market, but countless farmers who have seen crop and livestock prices drop? Fewer farmers equals food shortages, raised food prices, and labor shortages to harvest existing crops; in a parallel, compounding trend (are you seeing how many of these there are?) – countries will ban food exports to keep it for their own people. In Iran there is no similar restaurant culture except for barbecued food – in the West restaurants are nearly 40% of the food supply; think it won’t strain their system to cut that off like they have? Again, the West is not Iran, which last year achieved 81% agrifood sufficiency.
Not a foodie? What else should I talk about? How many web links should I provide? How much of this has been common sense and logic?
What about the stock market and how the US pension system is based around it? They’re going to ban stock buybacks with Quantitative Easing money? Great! But then how will it go up? If the US stock market has to actually reflect the health of their corporations and economy… then Gramps survives corona but needs to go back to work at 76? Got time to think about that?
The Eurozone is going to pay wages and guarantee jobs? You mean their model isn’t like the US ideology of, “Let the market liquidate whenever and wherever?” Great! But with what money – you want to loan to the long-stagnant, undemocratic, unaccountable, detested, Eurozone?
What about the apparent guarantee of new outbreaks when lockdown finally ends? The problem has never been corona for non-socialist inspired states: it’s that your health care systems can’t handle the overload. But what your media is not saying is this: your economies as whole cannot handle the overload, either. Again, the West is not Iran: Iran had the region’s best health care to start with, and they have long rejected the capitalist refusal of prevention, foresight, funding, etc.)
Here’s the biggest question? Are banks going to start lending? They haven’t since 2008 despite all the QE, and the economic outlook is even worse now – why will banks not hold on to the QE this time? LOL, riddle me that, neo-fascist Batman, and all while you are telling me how socialism is terrible.
There is just too much to process for me – on the level of economic reality and the total illusions Westerners are clinging to and have clinged on to for decades. More articles addressing these issues will be needed – I hope they don’t get totally lost in the corona panic and the virtue-signalling.
For you good journalists who are aware of these realities: how many of you are only good doomsdayers because you aren’t openly pushing socialism as a solution? I don’t expect people to champion Islamic Socialism – Iranian, or not – but why are you silent on openly championing socialist alternatives? But I know why: you’ll all lose your jobs if you openly push socialism; you will be certain to not get promoted. Hedge funds like Black Rock own your media. Same old story….
The formula holds: the longer this panic lasts, the longer the economic recovery will take
There is ZERO CHANCE of a “V-shaped” recovery, get it?
There is no way the economy will “snap-back” in just a few weeks – only an MSM know-nothing could possibly think this. Sure, there are stocks sitting idle, I get that. But do you understand the role big capital plays in a Western economy that is predicated on governmental non-intervention and governmental non-ownership? Do you understand the precarious state the Western economy was already in. Does the simple sentence, “Inflating Everything Bubble 2 to deal with Everything Bubble 1 was the West’s solution to 2008” mean anything to you? LOL… Everything Bubble 2 is bigger and worse!
Maybe you just don’t get the collateral damage of such a shut down? A national – or even global economy – is just like a household, right?
And the economy was “fixed” after 2008, right?
Or – now just hear me out before you corona-bully me, please – is the true reality that, as I wrote: Corona is rewriting capitalist-bust chronology and revealing that the alleged boom from 2009-2019 was only limited to only the 1%, which means that in the inescapable “capitalist boom/bust cycle” corona has merely rejoined the 1% with the 99% in a bust period which dates back to the end of the ‘90s economic boom?
Westerners please believe me: you chose consumer demand/bankocracy (Western central bankers: they’re God, they trust) to constitute the shepherd of your economies, instead of vanguard progressive political parties, and you kept mistreating these consumers for four decades, and now y’all are deciding to both commit hari-kari AND murder far more of these consumers than corona is killing.
Your Western conscience calls again: you have equated scoreboard-watching – in what I called the “sports-journalization” of Western media – with good data produced by good, unrushed science. That type of data on corona just doesn’t exist – I’m sorry. Everyone from some people in the WHO to nations to doctors have said this in one form or another, but they are shouted down by a private Mainstream Media which prefers to talk about the latest corona death in a 82-year old diabetic with heart disease. But I’m not going to write an article based around bad data no matter how callous it FALSELY makes me appear.
Socialist-inspired nations like China, Iran and Cuba – and on a much lesser level the Scandinavian-type social democratic nations (And only because they have not-yet completely rolled back the Marxist-inspired gains created by policies from the 1960s. Of course, since the 1990s Sweden has seen a faster increase in inequality than any other nation – it is Western, after all, and thus NOT a modern model) – have different economic cultures, realities, experiences, and levers and will thus have much better outcomes. The West can learn from these nations to change their post-corona economic realities, but they cannot undo/ignore the realities which they chose to entrench prior to the point when corona hit.
The West is arguing between allowing bankruptcies and more loans (bailouts) when there is an alternative – massive taxes on the rich, nationalisations and increased government bureaucracy (you know, what provides GOOD JOBS for the poor/unemployed, and what also provides the people who handle crises like pandemics), with all the cultural fraternity, cohesion, equality, and stability those three things create… yet which the individualist and imperialist West dismisses. We don’t need to reinvent the wheel – the playbook has always been there. Start with ending banker rule, move on to ending lawyer-bureaucracy, go on lockdown only to have a massive national discussion (i.e. a Cultural Revolution), etc. and etc.
Corona contrarianism? How about some corona common sense? Here is my list of articles published regarding the corona crisis, and I hope you will find them useful in your leftist struggle!
A day’s diary from a US CEO during the Corona crisis (satire) March 23, 2020
If Germany rejects Corona bonds they must quit the Eurozone – March 30, 2020
Ramin Mazaheri is the chief correspondent in Paris for Press TV and has lived in France since 2009. He has been a daily newspaper reporter in the US, and has reported from Iran, Cuba, Egypt, Tunisia, South Korea and elsewhere. He is the author of the books ‘I’ll Ruin Everything You Are: Ending Western Propaganda on Red China’ and the upcoming ‘Socialism’s Ignored Success: Iranian Islamic Socialism’.