The Global Plandemic and Economic Shutdown Why the World is Heading to War

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 up—and 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 factors—interest, 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 soar—and 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 or demand. 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 things—so 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) as local government tries to tax the rich to make up for shortfalls in their budgets since they shut down their cities for months to prevent the spread of a virus that no one really ever knew anything about in the first place.

Liquidity refers to the amount of money in the financial system. The more liquid banks and consumers are, the easier it is to buy and sell. When liquidity dries up, the bid and ask can become far apart making it harder for sales to happen. The market can come to a screeching halt. The Federal Reserve tries to maintain liquidity by printing off new money and using it to buy Treasuries or mortgage-backed securities or even corporate debt as it is now doing (Marshall-Genzer, 2020). All this is done in the name of keeping the markets functioning—because if they stop functioning, all those funds that depend on a big return on investment (ROI) can quickly collapse, leaving pensioners or insurance companies in ruins.

So what is inflation? Inflation is a rise in consumer prices and it happens when the money supply is drastically increased over a short period of time by, for instance, the Federal Reserve increasing liquidity dramatically. Because there is a flood of new money put into the system it devalues the money already in the system. Producers raise prices as demand increases. One of the problems that can sometimes occur when liquidity is increased, however, is that demand does not increase with it. This can happen because the economy is not actually in good shape. There is no real growth, there is more unemployment, there is no energy consumption, there is no spending, and people are nervous about making big purchases because they do not know what the future holds. This can cause prices to actually decrease, and that is the definition of deflation. Things lose their value because no one is offering anything for them. This happens to homes when there are no buyers, to commodities like oil where there is no demand.

Right now it may be that we see a mixture of inflation across some assets and deflation across others. However, the amount of money injected into the system since the shutdown has been so large it is hard to see how deflation results. Once nations open back up there should be demand once more. Inflation will very likely continue to rear its head. All one need do is look at where gold is trading—near all-time highs, and for good reason: the dollar is being dumped. And that raises the issue of what it means to be a reserve currency and what happens when nations go to war—which also seems dangerously close as China and the US publicly bicker over Taiwan, Hong Kong, trade and technology.

Recommendations

COVID 19 served as a pretext for reshuffling the economy: industries got bailouts while taxpayers got little. The middle class has been squeezed, and the buyer of last resort has been there to prop up the markets as usual. The economy cannot recover, however, so long as good money is thrown after bad. No company should be considered too big to fail. The mistake made in 2008 was that the banks needed bailing out because they were too big to fail. They should have been left to fail. When there are no consequences to corporate actions, corporations indulge in all sorts of risky decision making, such as taking on billions in new debt to fund share buybacks, which allow investors and options holders (like corporate executives) to make millions—but it does nothing for stakeholders (workers and consumers). Companies like Boeing spent billions on buybacks instead of actually designing a plane that worked, and the cost was the crash of two planes, the loss of hundreds of lives, the grounding of an entire fleet, the loss of billions in business, and the future of the company put in jeopardy. Yet Boeing is believed to be too big to fail. It should be left to fail just like every other company that acts recklessly.

The lesson of debt, leverage, and risk management has to be relearned. Share buybacks should be made illegal once more, as used to be the case prior to the 1980s. It is a form of market manipulation and it is a conflict of interest for those running the companies. That money should go to paying for research and development or to dividends—but 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 pain—but 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.