Insolvent Wall Street banks have been quietly bailed out again. Banks made risk-free by the government should be public utilities.
When the Dodd Frank Act was passed in 2010, President Obama triumphantly declared, “No more bailouts!” But what the act actually said was that the next time the banks failed, they would be subject to “bail ins”—the funds of their creditors, including their large depositors, would be tapped to cover their bad loans. Continue reading
So far, it can be said that central banks and governments in most advanced economies have acted correctly to prevent the economic lockdown of large segments of the economy from turning into a total economic disaster. They have, at least, saved the day. Continue reading
Congress seems to be at war with the states. Only $150 billion of its nearly $3 trillion coronavirus relief package—a mere 5%—has been allocated to the 50 states; and they are not allowed to use it where they need it most, to plug the holes in their budgets caused by the mandatory shutdown. On April 22, Senate Majority Leader Mitch McConnell said he was opposed to additional federal aid to the states, and that his preference was to allow states to go bankrupt. Continue reading
A central bank-financed UBI can fill the debt gap, providing a vital safety net while preventing cyclical recessions.
According to an April 6 article on CNBC.com, Spain is slated to become the first country in Europe to introduce a universal basic income (UBI) on a long-term basis. Spain’s minister for economic affairs has announced plans to roll out a UBI “as soon as possible,” with the goal of providing a nationwide basic wage that supports citizens “forever.” Guy Standing, a research professor at the University of London, told CNBC that there was no prospect of a global economic revival without a universal basic income. “It’s almost a no-brainer,” he said. “We are going to have some sort of basic income system sooner or later ….” Continue reading
Did Congress just nationalize the Fed? No. But the door has been cracked open for that possibility.
Mainstream politicians have long insisted that Medicare for All, a universal basic income, student debt relief and a slew of other much-needed public programs are off the table because the federal government cannot afford them. But that was before Wall Street and the stock market were driven onto life-support by a virus. Congress has now suddenly discovered the magic money tree. It took only a few days for Congress to unanimously pass the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which will be doling out $2.2 trillion in crisis relief, most of it going to Corporate America with few strings attached. Beyond that, the Federal Reserve is making over $4 trillion available to banks, hedge funds and other financial entities of all stripes; it has dropped the fed funds rate (the rate at which banks borrow from each other) effectively to zero; and it has made $1.5 trillion available to the repo market. Continue reading
The US airline companies have bankrupted themselves by buying back their stock in an enrichment scheme for CEOs and board members. With the impact of the virus on their revenues, Congress is handing them a $50 billion bailout. Instead of being bailed out they should be nationalized. Continue reading
Here we go again: Another financial bubble burst and another financial crisis threatening to disrupt the real economy! This time the trigger is the health pandemic of the coronavirus crisis, the most serious in a generation, which is paralyzing the real economy and triggering crashes in the financial sector. Continue reading
In what is being called the worst financial crisis since 1929, the US stock market has lost a third of its value in the space of a month, wiping out all of its gains of the last three years. When the Federal Reserve tried to ride to the rescue, it only succeeded in making matters worse. The government then pulled out all the stops. To our staunchly capitalist leaders, socialism is suddenly looking good. Continue reading
No real explanations by the Fed; it just dictates. It is a government of its own inside our government—the epitome of corporate socialism.
If you are a saver in a money market account or in a bank, you’ve already noticed your dwindling interest income as interest rates have been at their lowest in modern American history. Well, brace yourself. Your saving account has just become little more than a lock box, thanks to the supreme dictatorship of the Federal Reserve. Continue reading
Coronavirus and globalism will teach us vital lessons. The question is whether we can learn vital lessons that do not serve the ruling interest groups and ideologies. Continue reading
When the World Health Organization announced on February 24 that it was time to prepare for a global pandemic, the stock market plummeted. Over the following week, the Dow Jones Industrial Average dropped by more than 3,500 points or over 10%. In an attempt to contain the damage, on March 3 the Federal Reserve slashed the fed funds rate from 1.5% to 1.0%, in their first emergency rate move and biggest one-time cut since the 2008 financial crisis. But rather than reassuring investors, the move fueled another panic sell-off. Continue reading
While U.S. advocates and local politicians struggle to get their first public banks chartered, Mexico’s new president has begun construction on 2,700 branches of a government-owned bank to be completed in 2021, when it will be the largest bank in the country. At a press conference on Jan. 6, he said the neoliberal model had failed; private banks were not serving the poor and people outside the cities, so the government had to step in. Continue reading
Although the repo market is little known to most people, it is a $1-trillion-a-day credit machine, in which not just banks but hedge funds and other “shadow banks” borrow to finance their trades. Under the Federal Reserve Act, the central bank’s lending window is open only to licensed depository banks; but the Fed is now pouring billions of dollars into the repo (repurchase agreements) market, in effect making risk-free loans to speculators at less than 2%. Continue reading
According to official US government economic data, the US economy has been growing for 10.5 years since June of 2009. The reason that the US government can produce this false conclusion is that costs that are subtrahends from GDP are not included in the measure. Instead, many costs are counted not as subtractions from growth but as additions to growth. For example, the penalty interest on a person’s credit card balance that results when a person falls behind his payments is counted as an increase in “financial services” and as an increase in Gross Domestic Product. The economic world is stood on its head. Continue reading
Former Federal Reserve Chairman Alan Greenspan called Paul Volcker “the most effective chairman in the history of the Federal Reserve.” But while Volcker, who passed away Dec. 8 at age 92, probably did have the greatest historical impact of any Fed chairman, his legacy is, at best, controversial. Continue reading
Retail workers are organizing to make sure private equity firms can’t make money by putting people out of work.
For many years, Giovanna De La Rosa enjoyed working at Toys ‘R’ Us—especially during the holiday shopping season. “I loved bringing joy to families and to children,” she shared at a recent congressional hearing. “I watched so many of the local kids grow up over the years while shopping in our store.” Continue reading
What’s going on in the repo market? Rates on repurchase agreements (“repo”) should be around 2%, in line with the fed funds rate. But they shot up to over 5% on September 16 and got as high as 10% on September 17. Yet banks were refusing to lend to each other, evidently passing up big profits to hold onto their cash—just as they did in the housing market crash and Great Recession of 2008-09. Continue reading
Egalitarian-minded economists are pushing for a ‘GDP 2.0’—and getting some lawmaker help.
Why do so many Americans deeply distrust government? One part of the reason, two top economists suggested to a key congressional committee this week, just might be the most basic—and familiar—of the economic statistics the federal government produces. Continue reading
‘GE hired a new CEO last year with a pay package worth up to $300 million.’
Workers are stuck “paying the ultimate price for executives’ poorly-timed deals,” said Our Revolution on Monday after General Electric announced it was freezing the pensions of roughly 20,000 employees with salaried benefits. Continue reading
‘The people of California just went up against the most powerful corporate lobby in the country—and won.’
California Gov. Gavin Newsom on Wednesday signed into law historic legislation that would allow the state’s cities and counties to establish public banks as an alternative to private financial institutions, a move advocates hailed as a “stunning rebuke to the predatory Wall Street megabanks that crashed the global economy in 2007-08.” Continue reading
President Trump wants negative interest rates, but they would be disastrous for the U.S. economy, and his objectives can be better achieved by other means. Continue reading
Donald Trump and his enablers are hoping that a strong economy will help the American people look past the damage they are doing to the country. That’s why Trump is constantly crowing about job numbers and the stock market in order to paint a rosy picture of the economy. Continue reading