By Chris Fry
From an August 19 CNBC report:
Nearly 40% of Americans who lost a job or had a reduction in take-home pay due to Covid-19 can’t last more than a month on savings of any kind…
It’s a sobering reminder that many families are teetering on the edge of financial ruin.
Meanwhile, federal unemployment aid ended in July and eviction protections have expired in many parts of the country.
More alarming still, about 1 in 5 people couldn’t last more than two weeks off of their savings, such as an emergency stash or money earmarked for retirement, the company found.
Hunger stalks the land
An August 18th article in the Business Insider puts this problem in stark terms:
A pre-pandemic study by the USDA shows “37.2 million people, including 11.2 million children, did not have adequate access to nutritious food to live a healthy life.”
Based on data from that study, Feeding America estimates the number is ” likely to grow by 17 million, including nearly seven million children.”
These disparities are drawn between strong racial and economic divides.
In the US, Latino residents are two times more likely to suffer from food inequality than their white counterparts; Black residents are two-and-a-half times more likely.
Millions of workers and their families face the loss of health insurance at this time of greatest need:
An estimated 5.4 million American workers lost their health insurance from February through May, one study finds. Nonprofit Kaiser Family Foundation estimates that about 27 million in total are at risk of losing coverage during the coronavirus pandemic, and could be left struggling with COVID-19 or other illnesses along with a lack of income that can make paying medical bills nearly impossible.
At the same time, federal moratoriums on evictions and foreclosures are expiring, with millions facing homelessness.
The rich are getting richer: much, much richer
But if you listen closely, you can almost hear the champagne glasses clinking in the penthouses overlooking Manhattan and the mansions on the Hamptons shoreline. While 783,000 have died around the world, with more than 175,000 dying in the U.S. from coronavirus, billionaires have raked in $731 billion, a 30 per cent increase of their fabulous wealth, since the pandemic began.
According to Forbes, U.S. billionaires now have a total combined wealth of more than $3.65 trillion!
Reformist Senator Bernie Sanders provides some details about this in an August 11 Guardian article:
$13,000,000,000. That’s how much Jeff Bezos, the wealthiest man alive, made in one day while the companies he owns denies paid sick leave, hazard pay and a safe workplace to hundreds of thousands of his workers.
$21,000,000,000. That’s how much the Walton family, the richest family in America, made over the past 20 weeks while US taxpayers continue to subsidize the starvation wages at Walmart, the largest private employer in America.
$731,000,000,000. That’s how much the wealth of 467 billionaires increased since the Federal Reserve started taking emergency actions to prop up the stock market in March.
An August 19 New York Times article reported that:
It took Apple 42 years to reach $1 trillion in value. It took it just two more years to get to $2 trillion.
Even more stunning: All of Apple’s second $1 trillion came in the past 21 weeks, while the global economy shrank faster than ever before in the coronavirus pandemic.
Meanwhile, the well-heeled minions of these parasites in Congress and the Trump White House proclaim that the meager $600 a week supplement for the unemployed was so much money that the workers had no incentive to slave for their bosses. So, they cut it off at the end of July.
This bonanza for the billionaires did not come from some fabulous innovation, some explosion in demand and sales. When a panic hit Wall Street in February and March because of the pandemic, the banker’s banker, the Federal Reserve, opened a firehose of cash into the coffers of big business to prop up their stock prices. They did this by lowering interest rates to next to nothing by flooding the market with government bonds. And then they took the unprecedented step of buying corporate bonds.
And it worked. Despite the social and economic crisis, despite a 10 per cent decline in the GDP, despite an official unemployment rate of 11 per cent, Wall Street’s share prices are right back to what they were before the pandemic hit. Big business is ecstatic over their “v-shaped” recovery, the shortest in history.
But there is no recovery for the workers and oppressed. As an August 14th article in the Nation put it:
Though recessions almost always hit lower-wage workers the hardest, the pandemic is causing especially large gaps between rich and poor, and between white and minority households. It is also widening the gap between big and small businesses. Some of the largest companies, such as Nike and Best Buy, are enjoying their highest stock prices ever while many smaller businesses fight for survival.
Some economists have started to call this a “K-shaped” recovery because of the diverging prospects for the rich and poor, and they say policy failures in Washington are exacerbating the problems.
Zombie companies, zombie markets, zombie capitalism
The concept of “zombie” arose in enslaved Haiti:
Slaves who considered committing suicide to escape their miserable lives were constantly reminded by their overseers (usually other slaves who were sometimes also Voodoo priests) that, if they killed themselves, they might become zombies, or walking dead with no souls who are bound to do the bidding of a mortal master. Zombies could never reach lan guinée (which literally means Guinea, or West Africa, the final resting place).
The slaveowners scare tactic certainly backfired, as the Haitian slaves avoided suicide by waging the most powerful slave revolution in history, and went on to defeat three colonial armies – the Spanish, the English and the French – that were sent to place them back in chains.
In economic terms, a “zombie company” is one where the cost of servicing its corporate debt is greater than the profits that it is generating. A June 15th article in Axios indicates that, because of the pandemic, one in five of U.S. companies have become zombies. More than two million workers are employed by these corporate zombies.
In a June 16th interview with CNBC, economist Mohamed El-Erian warned that watchers of the global economy should not just be worried about “zombie companies,” but also about “zombie markets.”
So far in 2020, the Fed has announced more than $3 trillion worth of monetary policy stimulus to protect markets, adding corporate debt to its balance sheet for the first time.
“The mentality of the market is if they’re willing to do high yield, they’re willing to do equities, because after all, the last thing the Fed wants is a financial crisis to make the economy worse,”The market feels very strongly that it basically is holding the Fed hostage.”
Other western countries have adopted the same desperate policy. This massive infusion of cash by the central banks into the stock market is creating a “bubble” bigger than that before the dot com crash, before even the subprime loan and derivative speculation that sparked the Great Recession in 2008, which cost 20 million people their homes and 30 million their jobs.
One effect of this “artificial” propping up the stock market is to increase the reelection chances of Boss Trump, who constantly reminds his followers that he must retain power to protect their 401-Ks.
But all of this is placing the capitalist system at the edge of a cliff. As a July 18th Bloomberg article states:
Bubble or not, it’s an unsettling sight to watch the ranks of unprofitable companies growing while their stocks keep rallying. In the second quarter, where the number of loss-making companies are expected to increase to 43% of the Russell 2000, the benchmark jumped 25%, the best gain in nearly 30 years.
Fretful investors fear the bonanza could create pain down the road should monetary stimulus stop or the economy fail to rebound as fast as expected. Already, there are signs a V-shaped recovery may not materialize. JPMorgan Chase & Co.’s CEO Jamie Dimon warned of just that Tuesday (July 14th), saying traditional recessionary effects have been masqueraded by stimulus, for the time being. Worse could still await.
“At some point the companies that are hanging on by a thread are going to declare bankruptcy,” said GuideStone’s Spika. “We’re going to have to pay the piper.”