It's been over a year since Covid shut down our worlds. What has changed? Apparently nothing. Instead of using the lessons learned over the past year, here we are, being told that we need to get back to "normal". I hate to break it you but normal wasn't working for the vast majority of our society; it was only working for the elites. And those elites desperately want their system back. So, get back to work and start buying shit you don't need; these executives and their wall street buddies can't afford their seventh home and third yacht.
Let's look at what occurred over the past year and what should have happened because of it.
The economy crashes if we don't spend money.
Seems obvious, right? But I don't think we truly understand this concept. If the average person gets paid $4,000 per month. That money goes to rent, bills, groceries, debt, gas, etc. And we know most people live paycheck to paycheck, which means $4,000 in, $4,000 out. The wealthy, on the other hand, get paid and buy assets. Meaning the money doesn't go back into the economy at all, only into the stock market, real estate, etc. So, the people are the ones that keep this economy going. Let's take a look at what happened.
Lockdowns began in March of last year. The essential workers (nurses and doctors, EMTs, grocery store workers, sanitation workers, firefighters, police officers, agriculture and food production workers, delivery drivers, postal service workers, mass transit workers, teachers, cleaning personnel and building operators) never stopped working. They kept this country... no, the world, going in one of its most trying times. These are the people absolutely critical for this world to operate. Not the suits up in their fancy offices.
The rest of us were either laid off or began working from home. With no need to drive and decreased manufacturing, oil supply outpaced demand and prices plummeted, even going negative to -$37 per barrel. In essence, you would have gotten paid to take delivery of oil. In addition, retail stores and restaurants were closed, so people were not spending money or consuming.
As a result, our economy came to a screeching halt. The economy is specifically designed to function on consumerism, which works great in a booming economy, but not in a recession. In a recession, people don't have the money to spend so the cycle of money in, money out slows significantly. And yes, we were in a recession last year - we had 2 consecutive quarters of negative GDP, an unemployment rate of 14.7% and contractions in income and manufacturing.
To provide liquidity and keep the economy afloat, the government provided stimulus to the people, bail outs for corporations and PPP loans small businesses. The government also implemented eviction moratoriums to prevent landlords from evicting tenants in the middle of a pandemic and provided an additional $600 per week to the unemployed.
What should have happened? Every essential worker should have received a bonus, a pay increase, and the respect they deserve. The government also did the right thing with the stimulus package in my opinion. The average person and business needed help, and it was beneficial and necessary to get us through a difficult time. Corporate bail-outs on the other hand, should never have happened. Why?
Corporations are irresponsible with their money and believe they are "too big to fail".
Instead of saving money for a rainy day, corporations performed stock buybacks for a decade and couldn't weather one month of turmoil. A stock buyback is when a company uses its cash on hand to buy stock in it's own company. By doing this, the company artificially inflates its stock price (supply is reduced, demand is increased and stock price goes up). So, instead of having an emergency fund, which is the first thing we are taught in finance 101, they spent billions on these buybacks. When Covid hit, their business was affected and they risked going bankrupt.
Of course, they take responsibility and acknowledge their fuck up, right? Nope! They went to the government crying for a bailout. And what did the government do? Handed them billions of dollars and bailed them out, aka socialism for the rich.
What should have happened? Companies who were irresponsible with their money should have been forced to issue corporate bonds (essentially a loan where the company pays interest to purchaser of the bond). If investors believe in their business, they could buy the bonds and provide liquidity to the company. If investors don't believe in the business or its leadership, the company is shit out of luck and they are forced to seek a merger or file for bankruptcy. When a company is bought out or merges with another company, the workers and assets are transferred. If a company enters bankruptcy, its assets are auctioned off to the highest bidder, and some of the workforce is included with the sale.
So, if your argument is what about the workers, or you actually believe companies are too big to fail, remember this - even with the bail outs, workers were laid off en masse last year. Many are still unemployed, while the CEOs receive huge bonuses and pay raises. Oh, and many companies have began buying back stock again at record levels.
We don't need to work in offices.
Companies were forced to accept remote work. No option. And it worked well. Productivity even went up. We have proven over the past year that offices are antiquated and no longer necessary. With the power of technology, there's no need to wake up at 6am, get ready, travel over an hour to an office to sit in your cubicle (or open space), pretend to work for a 8-9 hours, travel over an hour back home, cook dinner, and have two hours to yourself. We can now roll out of bed 5 minutes before work, do the work required at your own pace (no pretending to look busy) and when the clock ends, you have time to yourself.
But, with vaccines going in people's arms, companies are calling its employees back to the office. Why? Three reasons. Your company wants to control you. Old people (upper management) are terrible with technology. Sociopaths need the office to kiss ass and climb the corporate ladder.
What should have happened? Companies should have realized remote work was the future and it would save them money at the end of the day. No office space to rent. No utility bills. No cleaning services. No food and drink bills. No office furniture or supplies. A simple cost analysis should have been performed and remote work should have become the new normal.
The Stock Market does not reflect the economy.
After dropping 35% in March, the stock market fully recovered by July, despite the fact that the economy was in a recession, In fact, to date, the market has risen nearly 89% from the lows. How? The printer go brrrrrrr.
The Fed stepped in and provided liquidity to the market, by printing trillions and trillions of dollars. They then took that money and purchased bonds, debt, and even index funds. So, instead of letting markets function autonomously, they artificially propped up the market and drove it to all time highs. So, while 20% of this country was unemployed and standing in food lines, the rich got richer thanks to the Fed.
What should have happened? The Fed should not have intervened in the market. Plain and simple. Yes, it may have been painful in the short term, but that's' part of the boom/bust economy we have created. Busts are perfectly normal and healthy.
Instead, by propping up the market, they have just kicked the can down the road. If the Fed continues to print money, the dollar will lose its value, assets will become heavily inflated, and the market bubbles will get bigger and bigger. Honestly, assets are already ridiculously inflated. Look at the real estate market. A home in Washington, D.C. went for $200k over ask and had 76 all cash offers. That's not normal, and that's happening all across the country. Stock market valuations are at their highest levels, even higher than the dot-com bubble. See the Buffett Indicator. And then there's crypto and NFTs. DOGE coin was up as much as 37,400% since last March. A digital artwork NFT sold for $69 million two months ago. Nothing makes sense.
Yes, I know, you can't predict when a bubble will pop, but thanks to the Fed, when this one pops, it's going to be worse than it should have been.
The markets aren't the only area we are seeing inflation. Gas prices are going up. Groceries are going up. Commodity prices are through the roof (see lumber and corn charts).
But, if you ask the Fed, they don't see any significant inflation. That's because the metrics they look at are useless; they don't look at the inflation that affects normal people, like you and I. So, our money is losing value and the price of things we need to survive are rising. The rich, on the hand, own the commodities and have their money invested in the markets profiting from inflation.
You can thank the Fed for rapidly widening the wealth gap.
Wall Street is still doing illegal shit and getting away it.
Redditors exposed the mother of all irregularities in January. Hedge funds were shorting over 140% of available shares in GameStop. The Wallstreetbets crowd decided to take action and started buying calls and shares to drive up the price to cause a short squeeze. And boy did it work; GameStop shares rose 2,700% in January, hedge funds were close to bankruptcy, and evidently, according to the Interactive Brokerage Chairman Thomas Peterffy, the entire system was on the brink of collapse.
As a result, nearly all brokerages restricted retail traders from purchasing shares, and only left them with the ability to sell. How can a stock price rise if you don't have buyers? It can't. They rigged the game. Wall street, on the other hand, could continue to do as they please - no restrictions whatsoever. Wall street basically took their ball and went home because they were losing.
What should have happened? Similar to the Fed issue, the markets should have been allowed to function autonomously. If it crashed, the hedge funds brought that upon themselves. Risk is part of the game. Shouldn't be overleveraged and shorting companies into oblivion. They won't learn anything if they aren't held accountable.
Speaking of overleveraged, hedge fund Archegos (technically a family office, even though it had billions in assets under management) caused a major ripple in the market in March. Bill Hwang, who ran Archegos, had margins estimated to be 10-12 times his net worth of $10 billion. Margin is basically a loan used to buy investments.
When Archegos faced a margin call on March 26th, they couldn't afford to pay back their loans. The banks that had been bank-rolling the firm through total return swaps (financial instrument where underlying stocks are held by the banks) liquidated billions of dollars worth of stock. This caused a cascade of selling as every bank who had dealings with Archegos raced to sell stock. Some stocks caught up in this scandal fell 40-50% (ViacomCBS, Discovery, Tencent). Banks have acknowledged billions in losses as a direct result of this.
What should have happened? Archegos should have never been allowed to have as much leverage as it did. Bill Hwang had already pleaded guilty to insider trading in 2013. He should have never been able to trade again. This is not the only firm out there like this. Question is - will they continue to get away with it?
Conclusion
This past year has exposed the flaws of our system. We, the people, should have realized we have all the power; the economy relies on us, not the ultra rich. We should be using last year as leverage.
Inflation is robbing us blind; pay us better wages or we won't work. If we don't work, we can't consume. Without consuming, there is no economy. The cycle doesn't work if you remove one of the gears. Fuck you, pay me.
The Fed needs to stop propping up the markets. If the government is going to print money, give it to us, not the corporations or the elites. Let the markets operate freely and stop widening the wealth gap with your monetary policy.
We need to stop letting wall street and corporations get away with their bullshit. Period. Hold them accountable. Elect people who will take them on head-on.
We need to work together and use last year to make changes. The old "normal" doesn't work anymore.
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