Economic Impact of the Covid-19 on Unemployment
Overview
Until the global lockdowns triggered by governmental response to COVID 19 hysteria in March 2020, the American economy had been seemingly humming along nicely. Unemployment was low, interest rates had even briefly been on the rise since the economic crisis of 2010, when the housing market bubble imploded and the Federal Reserve suppressed rates as part of a plan to stimulate the economy. However, the lockdown shuttered businesses. Oil prices collapsed to zero. The stock market dropped precipitously. For insurance funds, pension funds, sovereign wealth funds and mutual funds, drops in the market like that can be a disaster on returns. Thus, the Federal Reserve stepped in, began providing trillions of new dollars in liquidity to inspire buying. The market was bid back upand yet the economy still seems to be sputtering. What is it going to take to get back to normal and what will the impact of so much new liquidity be? This paper will address these issues by defining inflation, macroenomics, and policies.
What are the Issues?
Macroeconomics is the study of production, employment, prices and policies on a national scale. Interest, inflation, spending, growth and oil are all important factors to consider in when addressing macroeconomics. Because COVID 19 affected the global economy, it has to be looked at from the perspective of macroeconomics. That means one must consider each of those factorsinterest, inflation, spending, growth, and oil (which represents energy consumption). America used to be known as a free market or as a limited free market. Now it is beginning to resemble more and more a planned economy, like that of the former Soviet Union. Why is this? The reason is simple: whenever there is a collapse in demand, the central planners jump in to stimulate the market by acting as the buyer of last resort. In doing so, however, they impact interest rates (which affects how people save and borrow) and they impact inflation (by printing off trillions in new money it devalues the dollar and causes prices of commodities to soarand one can see this in housing, precious metals which typically track inflation, and equities).
The problem is that all of this stimulus is artificial: it is not based on real growth...
The fact that oil is still only at about $40 per barrel shows that the demand is not yet back up to where it was pre-COVID, and that is because so many
industries have been shuttered. People have stopped flying and businesses are doing work online instead of in-person. Yet, prices are rising for homes, for stocks, for
food, and for other thingsso how are people going to be able to pay for what is essentially inflation if they are out of work? The Federal Reserve is essentially responsible for
income inequality, as those who can invest in stocks have gotten rich since March (Hammer & Stein, 2019). Those who were small business owners have had to
sacrifice everything (Bartik et al., 2020). With the Federal Reserve keeping interest rates near zero and causing inflation through massive liquidity injections,
investors continue to pour money into zombie corporations that make up much of the Fortune 500, while
investment in communities flees (as in Chicago or New York)...
…research and development or to dividendsbut to use it to buy back stock is market manipulation plain and simple. It should not be allowed, just like the Federal Reserve should not be allowed to act as the buyer of last resort. If the market has no liquidity that is a risk that investors must face. Equities are not meant to be risk-free investments, yet the Federal Reserve acts as though they are because the infrastructure of finance capitalism depends upon the equities market always making perpetual new highs. This infrastructure is what
lies at the heart of the welfare state and that state is what leads to the mental, spiritual, political and social enslavement of mankind. Look at the protests in England or France or in cities across the US. It is all related. The only shortcoming of this recommendation is that the welfare state would collapse and people would have to suffer some short-term painbut that is better than the alternative, which is hyper-inflation and a fake economy aka a planned economy that will one day go bust the same way it did in the Soviet Union.
Conclusion
COVID 19 has allowed the central planners to bail out the corporations again while sticking the taxpayers not only with the bill but also forcing them out of business. It is little more than a power play, and the public should be pushing back hard to prevent the total loss of their rights and livelihood. Whether or not they will remains to be seen. If they do not, they will know hyper-inflation like that seen in the Weimar days. And they will soon enough…
