Tuesday, April 21, 2020

The New Feudalism

Are We Brewing a New Feudalism?

Paul Craig Roberts

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

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 It has been going on since the rules against concentration were set aside and the Glass-Steagall Act was repealed.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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