Kinda reminds of a tune by Earth, Wind and Fire…..but sadly this date is some dire predictions for the economy…..
There’s a chance that the worst of the damage caused by the coronavirus pandemic hasn’t happened yet. According to a troubling BuzzFeed News op-ed, the real economic and societal collapse could arrive in August.
Part of the problem, according to BuzzFeed’s argument, is that many of the measures put in place by the U.S. government to mitigate the coronavirus’s impact will expire in August — while the actual pandemic will likely continue to rage. The result is that unemployed Americans could once more be vulnerable to evictions, right when federal employment payments helping keep them afloat stop coming.
Back in April, when the limited federal aid offered by the U.S. government started to arrive, American households began to save, on average, 33 percent of their income out of fears of an impending economic crash, according to the op-ed.
Of course the White House or maybe the Congress will offer up some stim money to head off this possibility….but will it work?
The problem is that a significant portion of the money is being funneled directly into capital buffers, leading to an increase in precautionary balances. The situation is akin to the “liquidity trap” that so worried John Maynard Keynes during the Great Depression.
Today’s stimulus measures have understandably been rolled out in haste – almost in panic – to contain the economic fallout from the pandemic. And while this fire-hose approach was neither targeted nor precise, many commentators would argue that it was the only option at the time. Without a massive injection of emergency liquidity, there probably would have been widespread bankruptcies, losses of organizational capital, and an even steeper path to recovery.
The problem is the oligarchs always want money thrown at them and they will fix the economy…..they have not done so in 200 years and yet their wealth keeps going up….and problems still exist.
Does that tell you want these stim plans are really doing?
But not to worry….the markets are up….and yet you are still trying to find the cash to buy food or pay the rent…..how did all that stim money help you?
That brings me to a question I have asking for a very long time…..
We’ve said it before: The stock market is not the economy.
Usually, this simply means that fluctuations in the markets may have little to no real bearing on the underlying realities we think of as making up the economy. Or that there are many important structural factors that make the markets’ outlook different from how ordinary citizens view the country’s overall economic health.
But now, those usual bromides risk wildly understating the disconnect. In the time of COVID-19, the stock market couldn’t be more divorced from the United States’ broader economic situation. Although the S&P 500 tumbled sharply in March, as the coronavirus shut down large swaths of the economy, it had made back almost all of its losses by the first week of June — before dipping again and then quickly rebounding yet again.
I Read, I Write, You Know
“lego ergo scribo”