Are We
Brewing a New Feudalism?
By Paul
Craig Roberts
April
17, 2020 "Information
Clearing House"
-
The answer to the question is “YES.”
The large bailed-out creditors will end
up with the property of the non-bailed-out
debtors who are being pushed deeper into debt
with “bail-out loans” and fees and penalties for
missed debt payments. Write-offs for the One
Percent, and more indebtedness for everyone
else.
Turn your mind to the economy.
The US has a work force of 164,000,000.
The unemployment forecast from the work
closedowns is 30%.
That would mean 49,000,000 people who are
potential rioters. (We
are half way there with today’s report of a 16%
unemployment rate with 22 million unemployed). Many
of these people were already living paycheck to
paycheck, could not raise $400, and their debts
leave them no discretionary income.
As they could barely service their debts
when employed, how do they service them when
unemployed and when their small businesses are
closed and incurring costs but have no revenues?
Loans further indebt them. The cash
payouts to the unemployed might cover food and
housing but will not service their debts.
Fast food franchises and stores in malls are
saying they are not paying their rents for three
months.
Mall owners won’t be able to pay their
creditors.
The bailout works for no one except those
who caused the problem. As they are being bailed
out, they will have the money to buy up or
foreclose on the bankrupted businesses. More
property will be concentrated in fewer hands.
The bail-out scheme concocted by the New York
banks and Trump’s Treasury Secretary, who earned
the name “the foreclosure king” during his Wall
Street career, leaves creditors whole and
debtors deeper in debt.
The
more debt is concentrated in fewer hands and the
more indebted everyone else becomes, the less
consumer purchasing power there is to drive the
economy.
The foreclosed assets become less
valuable as their profitability declines with
consumer purchasing power.
The destruction of the US economy has been
underway since global corporations moved middle
class jobs offshore. It has been underway since
the financial sector diverted a larger share of
consumer income to the service of debt.
It has been underway since corporations
invested their profits in buying back their own
shares instead of expanding their production
capabilities.
It has been underway since Quantitative
Easing inflated stock and bond prices beyond
realistic values. It has been going on since the
rules against concentration were set aside and
the Glass-Steagall Act was repealed.
It has been going on since endless wars
crowded out infrastructure investment and social
safety net expansion.
Is this a plot or stupidity?
Whatever the answer, the economy is being
destroyed.
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The
economic problem is that private sector debt,
both personal and corporate, is too great to be
paid.
This problem existed prior to the
closedown.
The closedown means that there is even
less income with which to service the
unsustainable level of debt.
This is not a problem that can be fixed
with more debt.
The
problem is that banks lend to finance the
purchase of existing financial assets, not to
exand the economy’s productive potential.
The
problem is that corporations use their profits
and borrow money in order to buy back their own
equity instead of investing in their businesses.
The executives indebt the corporations
while decapitalizing them, and they are rewarded
for doing so with “performance bonuses.”
The
problem is that global corporations thinking
short-term moved high-productivity,
high-value-added US jobs to Asia, thus reducing
earned income in the US, impairing state and
local tax base, and causing the Federal Reserve
to substitute a growth in consumer debt in place
of the lost consumer income growth.
The
people in charge of the fix are only fixing it
for themselves and in a short-sighted way.
There is only one way to fix the
situation, and that is to write down private
sector debts to levels that can be serviced.
As the creditors are being bailed out
regardless, their loan losses don’t matter.
The bank and corporate bailouts are an
opportunity to fix the economy in other
important ways. In effect, the bailouts amount
to nationalization.
The government should accept the
ownership that it is purchasing.
Then the government can break up the
“banks too big to fail” and separate investment
from commercial banking without having to pass
new Glass-Steagall legislation and without
having to battle against financial lobbying in
Congress.
Once broken up, the banks could be sold
off.
This would take enormous vulnerability out of
the financial system and restore financial
competition.
With corporations in government hands,
the jobs could be brought home from overseas.
The middle class would be restored.
These measures together with a debt writedown
would restore consumer purchasing power. Pent-up
demand would propel the economy to higher growth
as occurred following World War II.
This is
a real solution to a real problem.
But with the One Percent in charge of the
problem, we are not going to get a real
solution.
We are going to get more money used to
push up prices of financial assets and paper
over unsustainable debt and a dying economy with
an artificially-inflated stock market.
The
elite have failed us too many times.
It is time to dethrone them.
Dr. Paul Craig Roberts was Assistant Secretary of
the Treasury for Economic Policy and associate
editor of the Wall Street Journal. He was
columnist for Business Week, Scripps Howard News
Service, and Creators Syndicate. He has had many
university appointments. His internet columns
have attracted a worldwide following. Roberts'
latest books are
The Failure of Laissez Faire
Capitalism and Economic Dissolution of the West,
How America Was Lost,
and
The Neoconservative Threat to
World Order.
Donate
and support Dr, Roberts Work.
- See
Also -
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‘You Have to Disobey’:
Protesters Gather to Defy Stay-At-Home Orders
Ron Paul:
The Backlash Is Here: From Michigan To Kentucky
The People Are Rising Up
Trump
tweets support for anti-lockdown protests
The
views expressed in this article are solely those
of the author and do not necessarily reflect the
opinions of Information Clearing House.
