The restless public, cooped up and idled in springtime’s flowering, have watched Wall Street doing just fine while they see the approaching sunset of their own much more modest Paycheck Protection Program and coronavirus relief checks. Late last week, the Dow Jones shot up 455 points the same day that the government announced the worst unemployment numbers since the lows of the Great Depression. Are there two economies in this country? One for people who expect to work for pay, and another for bankers who play shady games with money and receive extravagant bailouts when their games don’t pan out?
Kind of looks like it, a little bit. That tangled pile of cognitive dissonance is liable to catch fire soon like an overactive compost heap as the promised opening-up of America commences and tens of millions of able adults discover that their old jobs, vocations (and paychecks!) will never re-open, not to mention health care plans and pensions. God help us if the stock markets are still chugging up when that recognition sweeps the land.
And why won’t the markets keep chugging if the Federal Reserve keeps stuffing bales of dollars into Wall Street’s boilers? Jay Powell and his crew of monomaniacs apparently believe that bolstering the indexes is the sole signifier of a healthy system, and they’ve turned early adapters to Modern Monetary Theory (MMT), the idea that government can print as much money as it feels like to keep the wheels of activity turning (or, at least, the appearance of activity). In just two months, they’ve churned out trillions, equal to the first two hundred-plus years of the USA’s national debt — and, of course, new money is new debt because under our currency regime money is loaned into existence.
Well, one reason the markets may not keep chugging is that money is disappearing into the ol’ black hole of extinction even faster than the Fed can enter keystrokes that magically represent new money. The reason: if, in fact, money is loaned into existence, it is defaulted out of existence when the loans are not paid back. After all, that’s what a loan is: money advanced on a promise to be paid back, generally at interest, interest representing the time-value of money, that is, the duration of the loan. Do you have any idea how many loans are not being paid back, and may now never be paid back?
Start with houses. 63 percent of homeowners pay a mortgage (a loan) every month. The national average outstanding mortgage debt is $148,000. Total mortgage debt is $10.3 trillion. Now cars: There are roughly 260 million passenger vehicles registered in America, with upward of 100 million of them bought on loans that are still active, amounting to $1.2 trillion, enough to buy 53 million Ford Fusions at $23,000 each. Now credit card debt: total for the US is $3.9 trillion with an average carried balance of $9,333. Meanwhile, 45 percent of adult Americans have no savings.
As Senator Everett Dirksen (R-Ill) once quipped during a senate budget battle, “A billion here, a billion there, pretty soon, you’re talking real money.” Consider that a trillion is a thousand billion (and a billion is a thousand million). In an ordinary reality, a reality-based reality, that is, with reality-based money, that would be a lot of money (and a lot of debt)! It’s hard to project an exact figure, but with over 20 percent of the US work-force idle, with no income, there’s liable to be a lot of debt that’s not being paid back, will never be paid back, and a lot of money headed into extinction. That will translate into a lot of people with no money. Until all that money they owed is finished not being paid back, and the new money that the Fed is busy creating, with no relationship to the production of things of value, overcomes the old money that’s finished disappearing. Then Americans will have plenty of money. The catch is that the money will be worthless. Thus, the two ways of going broke: having no money; or having lots of money that’s too worthless to buy anything. So it goes.
Along with people’s hopes and dreams of a decent life. What you see, then, is a nation, and a system, that has come to be based on broken promises. That’s what the restless public will take away from this morass of statistics. The discord will rapidly leave the statistical frame and take hold in the emotional frame, and that frame will feature entirely negative emotion: rage, resentment, grievance, vengeance, feelings like that. The sum of all broken promises is a broken social contract. That’s the agreement that we will behave civilly in exchange for the liberty to go about our business — within clearly defined rules (laws) about what is legitimate business. A broken social contract is exactly what all these machinations are leading up to. Hence, the appearances of the state — the system and the people who run it — become more and more fantastically and transparently dishonest.
For instance, the fake candidacy of Joe Biden, a man too far gone in age and mind to be president, with a long slime-trail of family money-grubbing in and around his official offices, and now an old sexual molestation charge against him. Who do the Democrats think they’re kidding with this? The coronavirus gave them an excuse to stuff Joe in a closet for two months, but can they keep hiding him there after the grand opening-up?
Will Wall Street and its errand boys in the Federal Reserve keep working their shifty hoodoo, enriching shareholders, hedge funders, and corporate execs while everybody else hits the red-line of hunger and outrage? Will Mr. Trump do what he suggested way back on the campaign trail in 2016 and declare a national bankruptcy? There is, after all, a difference between bankruptcy and national insurrection. Bankruptcy, at least, holds the promise of a work-out. Financial work-outs are generally painful, but orderly. That could make all the difference.
