EU takes measures to ease virus economic impact
AP News, Mar 13 2020
The EC says it will set up a €37b investment fund and allow “maximum flexibility” on state aid and fiscal rules to help member states weather the economic hit by the coronavirus outbreak. EC president Ursula von der Leyen said the EU budget will guarantee €8b in liquidity for small and medium-sized companies affected by the crisis. She said Friday during a presser:
Member states should be encouraged to take all necessary measures to support their economy. The coronavirus pandemic is testing us all, and and most of all people. The virus is not only dangerous for our health, it is also hitting our economies. It is a major shock for the global and European economy. We have to take decisive and bold action now, on all levels.
Trading in Pindo futures was halted Friday with the Dow, S&P 500 and NASDAQ all surging more than 5%. A “limit up” trigger intended to keep market volatility within a set range went into effect hours before the opening bell. Markets in Europe were cheered by big announcements of financial support, particularly by Germany and France. The EU’s two biggest economies pledged hundreds of billions of dollars, and more if necessary, in guarantees to protect individuals and small businesses from the economic damage of the pandemic. France’s government is promising to compensate virus-related salary losses for “99%” of workers, as travel bans, school closures and other measures take a heavy toll on the economy. It’s part of tens of billions of euros the government says it will stump up to support the economy, as French financial markets plunge and companies curb activity to try to stem the spread of the virus. On BFM television Friday, Finance Minister Bruno Le Maire said that loan guarantees would be made available to small and medium businesses struggling because of the virus. He reassured the markets:
Nobody with a job will lose a cent. OK, for the highest salaries we might think of putting a limit on compensation, but we will provide for 99% of employees. We will do whatever is necessary to support our economy, and even more. How much will it cost? Tens of billions of euros.
France has more than 2,800 confirmed cases, including 61 deaths. The German government is pledging at least €460b in guarantees to cope with the economic impact of the coronavirus outbreak. German economy minister Peter Altmaier said there was no limit to the amount the government was willing to use to support everyone from individuals such as taxi drivers to large companies, to prevent the corona pandemic from causing permanent harm to the economy. Finance Minister Olaf Scholz said the 2008 financial crisis following the collapse of Lehman Brothers offered lessons for the current situation. He said at a joint presser with Altmaier on Friday:
We will use all means at our disposal. We won’t do things by half-measures.
Scholz told reporters in Berlin that thanks to careful spending in recent years the government was in a position to spend heavily to put in place necessary measures such as tax relief for companies and relaxing labor regulations. China’s government on Friday freed up additional money for lending by reducing the amount of their deposits commercial banks are required to leave on reserve at the central bank. The required reserve ratio will be cut by between 0.5% and 1% for banks that meet regulatory targets for lending to small and private businesses, effective Mar 16, the central bank announced. It said that should release an additional ¥550b ($80b) for lending. The People’s Bank of China said that was intended to lower financing costs and support economic recovery. China often uses such reductions to increase the amount of money available for lending without changing interest rates. A similar cut in the reserve ratio in January released ¥800b ($115b). Sweden’s central bank says it will lend up to kr 500b ($52b) to companies via the banks to keep them from “being knocked out as a result of the spread of the coronavirus.” In a statement, Central bank governor Stefan Ingves said:
Turbulence on the financial markets means that companies that are essentially robust may experience funding difficulties. It is then important that the banks continue to provide these companies with loans so that the credit supply is not threatened. The measures taken in this situation should be regarded as a form of insurance that enables Swedish companies, particularly small and medium-sized enterprises, to feel secure that the credit supply will not fail.
The central bank of non-EU member Norway said Friday it had decided to reduce the policy rate by 0.5% to 1%. Euro markets have opened mostly higher after a turbulent trading session in Asia. Shares rose in Paris and London, but fell 6.1% in Japan following Wall Street’s biggest drop since the 1987 Black Monday crash. Friday the 13th brought wild swings for some markets as governments stepped up precautions against the spread of the new coronavirus and considered ways to cushion the blow to their economies. India’s Sensex gained 4% after plunging 10% when it opened, triggering a brief halt to trading. Pindo futures were up more than 2% after the Federal Reserve and European Central Bank pledged more support for markets churned by a cascade of shutdowns across the globe.
Stocks surge on Wall Street; Dow jumps 550 points or 2.6%
AP, Mar 13 2020
Global financial markets surged Friday, clawing back a small slice of their losses in what has been a brutal week of selling as the spreading coronavirus heightened fear of a global recession. The early rally for Pindo stocks follows the worst slide for the market since the Black Monday crash of 1987. The Dow Jones Industrial Average jumped 550 points in the early going, a 2.6% gain. That’s about a quarter of what the index lost a day earlier. The benchmark S&P 500 index climbed 3%. Major indexes in Europe climbed about 7% a day after one of their worst drops on record. Bond yields moved broadly higher, a signal some investors were pulling back, at least for now, from seeking less-risky assets. The rally follows news that the Trump administration and House Demagog leadership are close to announcing an agreement on a coronavirus aid package aimed at reassuring anxious Pindos by providing sick pay, free testing and other resources. Treasury Sec Steven Mnuchin said Friday morning on CNBC that negotiations were going very well. Mnuchin said:
I think we’re very close to getting this done.
The wild swings came as governments stepped up precautions against the spread of the new coronavirus and considered ways to cushion the blow to their economies. More central banks, including those of China, Sweden and Norway, stepped in to support bond trading, a day after similar interventions from the Federal Reserve and the ECB. Benchmarks in Japan, Thailand and India sank as much as 10% early in the day, but India’s Sensex gained 3.3% in afternoon trading. In Bangkok, the Thailand SET fell 1.3% after its 10% plunge triggered a temporary suspension of trading. Markets world-wide have been on the retreat as worries deepen over the economic fall-out from the coronavirus crisis. The gains in Europe were the latest chapter in a period of remarkable volatility for financial markets, with major indexes plunging into bear market territory at record pace. Australia’s market jumped 4.4% after state and territorial leaders agreed to raise spending to counter the impact of the viral outbreak that has spread from central China across the globe, infecting 128k people. Losses narrowed in mainland China, where communities are recovering from the worst of the virus. The Shanghai Composite index fell 1.2%. The sell-off on Wall Street Thursday helped to wipe out most of the big Pindo gains since Trump took office in 2017. The S&P 500’s drop put it way over the 20% threshold for a bear market, officially ending Wall Street’s unprecedented bull-market run of nearly 11 years. Jingyi Pan of IG said in a commentary:
Between the lack of a strong Pindo fiscal response and the latest travel ban for arrivals from Europe to Pindostan, global markets appear to have been tipped over into a sell-everything mode.
Not all markets have suffered equally, but many are down by double digits from just weeks earlier. Thailand’s SET has lost nearly 40% and the Philippines’ benchmark is down more than 30%. Overriding concerns about the actual impact on business and trade is pessimism over how the crisis is being handled. The NYT wrote Friday:
Over-riding concerns about the actual impact on business and trade are culminating with pessimism over how the crisis is being handled, said Stephen Innes of AxiCorp, with the “sum of all fears the view that policy-makers remain well behind the curve.”
Despite the slight improvements in some markets, gloom prevailed in Asia on Friday. Tokyo’s close was its lowest in nearly four years. South Korea’s Kospi sank 3.4%. The worldwide rout has come amid cascading cancellations and shutdowns across the globe, including Trump’s suspension of most travel to Pindostan from Europe, and rising worries that the White House and other authorities around the world can’t or won’t counter the economic damage from the outbreak any time soon. For most people the new coronavirus causes only mild or moderate symptoms, such as fever and cough. For some, especially older adults and people with existing health problems, it can cause more severe illnesses, including pneumonia. The vast majority of people recover from the virus in a few weeks. Initially, many hoped the virus would be contained in China. But as the damage and disruptions from the outbreak mount, the combined health crisis and the market retreat have heightened fears of a global recession. Just last month, the Dow was boasting a nearly 50% increase since Trump took the oath of office on Jan 20 2017. It officially went into a bear market on Wednesday, finishing down more than 20% from its all-time high. For the S&P 500, this is the fastest drop since WW2 from a record high to a bear market. In other trading the oil market, which suffered huge shocks a week ago as the Toads and Russia clashed over output cuts, was recovering some ground. Pindo benchmark crude rose 3% to $32.45. Brent crude picked up 2% to $34.89.
Turbulent week on Wall Street ends with market surge
Nick Beams, WSWS, Mar 14 2020
Wall Street ended one of its most turbulent weeks in the post-war period with surge of more than 9% yesterday, following its worst day since the Black Monday crash of 1987 on Thursday. Most of the market rise came in the last hour of trading, during the press conference by Donald Trump in which he announced a series of measures to deal with the coronavirus that are primarily aimed at providing a boost to corporations, especially pharmaceutical companies. In addition to the belief there is money to be made out of the coronavirus, another reason for the surge was Trump’s announcement that he had ordered the Dept of Energy to buy oil for the Strategic Petroleum Reserve. This will provide a boost for shale oil companies hard hit by the price war launched by the Toads at the start of the week. Trump also indicated there could be assistance for the airline industry, which has been battered by his decision to impose a 30-day travel ban on entry to Pindostan by people from Europe. On the financial side, the market was boosted by a further intervention by the New York arm of the Federal Reserve. A day after it had announced it would supply $1.5t in short-term loans, the NY Fed said it would speed up purchases of Pindo T-bonds of all maturities, not just short-term debt, in operations throughout the day. It said the purchases were needed to “address highly unusual disruptions in the market for Treasury securities associated with the coronavirus outbreak.” There were concerns during Thursday’s market plunge of a “dash for cash,” as investors sold off all asset classes. Normally when stocks fall, bond prices rise, leading to a fall in yields. But during the sell-off, the yield on T-bonds rose as they were being sold off and the price of gold also dropped sharply. Even with yesterday’s surge, the Dow has lost around 15% this week. The WSJ commented it was the worst week since 2008, and “one of the worst in history,” with some expecting “the punishing stretch of selling to continue.”
The Trump administration’s moves to boost the market and corporations were preceded by a major initiative by the German government directed to the same end. Two days after Angela Merkel had declared that up to 70% of the German population could become infected with the coronavirus, her government announced a major plan, not to tackle the crisis, but to provide assistance to businesses. Finance Minister Olaf Scholz said the government, through the state development bank KfW, would provide unlimited loans to companies hit by the pandemic. Describing the measures as a “big bazooka,” he said the government would do “whatever it takes” and there was “no upper limit on the amount of loans the KfW can issue.” Economy Minister Peter Altmaier said the measures were “unprecedented in Germany’s post-war history” and they were the “most comprehensive and effective assistance and guarantees there have ever been in a crisis.” The German move came as EC President Ursula von der Leyen said the coronavirus was delivering a “major shock” to the eurozone economy. As recently as the beginning of this month, the prevailing view was that for the global economy the coronavirus outbreak would bring a first quarter downturn, followed by second quarter rise as its effects passed. With the lockdown of Italy and the rapid spread of the virus, that assessment now seems like ancient history. The EC warned yesterday that output in the eurozone could fall into negative territory this year, and the virus would have a “very large detrimental economic impact.” The contraction could be as large as 1% of eurozone GDP for 2020, compared with a previous forecast of 1.4% growth. Even before the virus struck, the German, French and Italian economies were on the brink of recession, due to a growing downturn in the manufacturing industry.
Following Trump’s announcement of a 30-day ban on travel from Eurostan to Pindostan, the global airline industry is reeling. In a memo to staff entitled “The Survival of British Airways,” CEO Alex Cruz has warned of job cuts, suspended routes and grounded aircraft. According to a report in the FT the company is in discussions with multiple lenders including the Bank of America, Goldman Sachs and Deutsche Bank over its need for urgent financing. Cruz wrote in the memo:
Some of us have worked in aviation through the global financial crisis, the Sars outbreak and 9/11. What is happening right now as a result of Covid-19 is more serious than any of these events. It is a crisis of global proportions like no other we have known.
Cruz has warned that the airline will be making job cuts, but British Airways has not yet specified a number. Similar warnings have come from other airline companies. Delta chief executive Ed Bastian has said the airline is in discussions with the Pindo government about assistance. Delta has revealed that cancellations have outnumbered bookings for flights over the next four weeks. Bastian wrote in a memo to employees:
The speed of the demand fall-off is unlike anything we’ve seen—and we’ve seen a lot in our business.
Delta is cutting 40% of its capacity over the next few months and is parking 300 of its aircraft. The German firm Lufthansa has announced it will ground two-thirds of its 800 aircraft. Air France/KLM said it had drawn down €1.1b of its credit facility and was facing an “unprecedented situation.” Some airlines are expected to declare bankruptcy, with Korean Air and Norwegian Air Shuttle, which specialises in cheaper-priced trans-Atlantic flights, two of the most likely to do down. Jacob Schram, chief executive of Norwegian Air Shuttle, summed up the situation facing the industry as a whole by saying:
We are facing the worst crisis in the company’s history and the biggest in the country since WW2.
WHO pleads for $675m to fight coronavirus
Bryan Dyne, WSWS, Mar 14 2020
Travelers wearing protective masks arrive at the main bus station
in Bogota, Colombia, Mar 13 2020 Photo: Fernando Vergara/AP
The WHO yesterday issued a plea for $675m/month to fight the global coronavirus pandemic. This came as confirmed cases of COVID-19 surpassed 145k, including upwards of 7,700 new cases in Italy, Iran, Spain, Germany and France alone. At least 93 countries reported at least one new case and at least 442 deaths were reported in the last 24 hours, raising the death toll above 5,400. WHO Dir-Gen Dr Tedros Adhanom Ghebreyesus stated:
We are at a critical point in the global response to COVID-19, we need everyone to get involved in this massive effort to keep the world safe.
Referencing the vast spread of the coronavirus, he noted:
More cases are now being reported every day than were reported in China at the height of its epidemic.
While Dr Tedros praised the response of South Korea, Singapore and Japan for their “aggressive testing and contact tracing,” which has so far kept the mortality rates in those countries relatively low, he warned against any complacency, saying:
Any country that looks at the experience of other countries with large epidemics and thinks “that won’t happen to us” is making a deadly mistake. It can happen to any country.
While Dr Tedros did not name names, it is not a stretch to relate the last comment to the response of the Pindo political establishment to the pandemic. Instead of providing the necessary resources to combat the greatest public health crisis Pindostan has faced in decades, the Fed instead yesterday announced it will provide $1.5t to the financial sector, in an effort to reverse the collapse of the stock market seen over the past several days. If this sort of money had been made available to the world to stop the coronavirus when it first emerged, its spread would have been stopped cold. Those that were infected could have received the best treatment, saving potentially thousands of lives. The economic disruption to the lives of workers caused by any necessary quarantines could have been mitigated. COVID-19 would have remained a deadly but ultimately small outbreak. The concern instead was not for the lives lost and those that will be lost in the weeks to come, but whether or not Wall Street needed a bail-out. It was only when the Dow Jones lost more than $2t of its market capitalization that the Pindo government intervened. In his press conference today, Trump announced a “national emergency” as a result of the pandemic, while at the same time maintaining the lie that the “risk to the average Pindo is still very low.” In reality, there are currently 2,269 confirmed coronavirus cases in Pindostan and that number is slated to increase by a factor of 10 every 7 days. At the current rate of spread, the number of COVID-19 cases in Pindostan will surpass those in China in two weeks. WHO boxtops also made the point that travel bans, such as those imposed on Wednesday by Trump against Europe, are generally ineffective. In a statement from Feb 29, before Trump’s ban was in place, it stated:
WHO continues to advise against the application of travel or trade restrictions to countries experiencing COVID-19 outbreaks. In general, evidence shows that restricting the movement of people and goods during public health emergencies is ineffective in most situations and may divert resources from other interventions. Furthermore, restrictions may interrupt needed aid and technical support, may disrupt businesses, and may have negative social and economic effects on the affected countries.
This again applies most sharply to the Pindo government, which has refused coronavirus testing kits from WHO and China, which have been proven to work, insisting instead on using kits developed by the Centers for Disease Control and Prevention (CDC). In every aspect, the deployment and use of these kits has been bungled and mismanaged. They were not available until the middle of February and were not distributed to every state until March. Patients exhibiting some but not all of the symptoms have been turned away from doctors, clinics and hospitals, despite the fact that the virus is known to spread even when its victims have no symptoms. The breakdown of testing in Pindostan was openly admitted during a House hearing on Wednesday. Dr Anthony Fauci, the Director of the National Institute of Allergy and Infectious Diseases and one of the members of the task force ostensibly assembled to combat the coronavirus in Pindostan, was forced to state:
The system is not really geared to what we need right now.
Fauci attempted an about face to this statement during Trump’s press conference, agreeing with the president’s claim that the CDC would be able to do 5m tests by the end of the month. Virtually every account of those attempting to get tested, on social media or in the mainstream news, says the opposite: that getting tested is still essentially impossible in Pindostan. While tests done by the CDC itself are free, much of the testing has been outsourced to the private sector, to corporations such as DiaSorin Molecular and Qiagen. For those with insurance, just to be tested for the coronavirus can cost up to $500. For the 27m Pindos without health insurance, the cost is often three times as much, a price that the majority of people simply cannot afford. Workers are being forced to choose either to go bankrupt or to risk the lives of their friends, co-workers, neighbors and families. The situation will only become more acute as the pandemic spreads unimpeded. The Pindo health-care system, like those in Europe, is being taxed beyond its limit and the number of cases is only set to rise. The neglect and criminality of Trump and his fellow oligarchs, directed towards the working class, means that the death toll in the country could rise into the millions.
The response of the ruling elite: Malign neglect
Alex Lantier, Andre Damon, WSWS, Mar 14 2020
Trump speaks in the Rose Garden of the White House, Mar 13 2020.
Photo: Evan Vucci/AP
The global coronavirus pandemic entered a new phase yesterday, with 16,000 new cases recorded worldwide by the Johns Hopkins coronavirus tracker. Another 250 people died Friday in Italy, which announced 2,547 new cases. Spain’s cases nearly doubled, growing by 2,086. In Pindostan, nearly 572 new cases were discovered, with nine new deaths. On Friday, the NYT published internal CDC estimates outlining various scenarios for the spread of the virus, concluding:
Between 160m and 214m people in Pindostan could be infected over the course of the epidemic … As many as 200,000 to 1.7 million people could die. … 2.4 million to 21 million people in Pindostan could require hospitalization, potentially crushing the nation’s medical system, which has only about 925,000 staffed hospital beds.
In the face of this mounting disaster, a massive chasm exists between the severity of the situation and the response of world governments. On the surface, this response appears to be chaotic, disorganized, and improvised. All of this is true. But out of this chaos a definite policy emerges, which can be defined as malign neglect. That is, governments are making a deliberate decision to minimize their response, to adopt an attitude of indifference to the spread of the virus. In the late 1960s, as mass strikes, urban riots and anti-war protests spread across Pindostan, Daniel Patrick Moynihan, the right-wing advisor of President Richard Nixon, proposed a policy of “benign neglect” of Pindo cities, meaning a policy of ignoring the causes of massive social unrest in the hopes that this would encourage the depopulation of centers of working class struggle. In their entirely passive response to the coronavirus pandemic, which is controllable only through massive coordinated government intervention, governments have extended the policy of “benign neglect” into something far more sinister. This week, Angela Merkel said 60% to 70% of the German population would likely be infected, potentially meaning the deaths of hundreds of thousands or millions of people. On Thursday, Boris Johnson declared:
I must level with the British public: many more families are going to lose loved ones before their time.
Neither the British nor the German government announced major additional allocation of funds to deal with the crisis. Rather, Johnson’s chief scientific advisor, Patrick Vallance, insisted that the British government should not try to keep the coronavirus from infecting the public:
It’s not possible to stop everyone getting it, and it’s also not desirable.
There is no doubt that at least some members of the ruling class see coronavirus fatalities as desirable. British Telegraph columnist Jeremy Walker stated openly what is being discussed within ruling circles when he wrote:
The COVID-19 might even prove mildly beneficial in the long term by disproportionately culling elderly dependents.
But the most callous response has come from Pindostan. On Friday, Donald Trump gave a press conference at the White House together with executives from some of the largest health-care and retail companies in Pindostan. Trump announced no additional measures to stop the spread of the disease or expand treatment for the ill. Rather, he announced that virtually the entire government response would be turned over to the private corporations. Instead of testing by the CDC, effectively all coronavirus diagnostics would be conducted by private corporations such as Quest Diagnostics and Labcorp. Instead of treatment at hospital facilities or on public property, they will be conducted in the parking lots of major retailers such as Walmart, Target and CVS. Trump said the website to coordinate and request testing would be designed and operated by a for-profit company, Google, which later clarified that no such website existed.
Trump made clear that the pandemic is a profit opportunity for the corporate executives standing with him, who were paraded around as if they were national heroes. In fact, their mania for profit lies behind the systematic destruction and defunding of social services that has made possible this disaster. For decades, it is these oligarchs who have subordinated every social need to “shareholder value,” the phrase used to justify the ever-greater accumulation of wealth at the hands of the financial oligarchy. Flanked by multi-millionaire executives, Trump appeared as the embodiment of the corporate state. The only role he sees for government, aside from pumping Wall Street full of money, is to use the national emergency to build up an apparatus of police repression. For the ruling elites, the coronavirus pandemic was never viewed as a health care crisis, but rather as a market event. The pre-eminent concern has always been the impact of this disease on share prices. The response has been a massive infusion of money and social resources into Wall Street, just as it was in 2008 and 2009. Trump’s press conference followed the announcement of a $1.5t bail-out of the financial system by the Federal Reserve, a figure twice as large as the original size of the 2008 bank bailout and over a thousand times larger than the emergency coronavirus funding requested Friday by the WHO. Trump was sending a very clear message to Wall Street: It doesn’t matter how many people die, what hell the population is forced to live through, my government will protect your wealth. The financial oligarchy with their private “concierge health care” and access to the best facilities, including antiviral drugs, oxygenation and emergency ventilators, know that they will get the best care even as medical workers in over-run hospitals are forced to make heart-rending decisions about who will live and who will die.
Wall Street got the message. In the half-hour between when Trump started speaking and the close of the markets, the Dow Jones Industrial Average shot up by about 1,400 points, in the largest daily stock market run-up in history. The main fear of the ruling class is not the devastating health consequences of the coronavirus, but the growth of social protests, to which they will respond with violence and repression. The eruption of strikes and walkouts by workers in Italy, protesting the fact that they are being forced to work amidst the pandemic, is only the beginning of the response of the working class. The development of a movement in the working class throughout the world must be armed with a program and a perspective. In the face of neglect and indifference by the oligarchy, the working class must fight for a massive and globally coordinated action to fight the disease. Trillions of dollars must be allocated, not for boosting share values and the wealth of the financial oligarchy, but for ensuring universal testing for everyone who needs it, the construction of new health care infrastructure, the production of desperately needed health care equipment, and emergency assistance for all those who are unable to work because of unsafe conditions. The monstrous and inhuman response to the pandemic by the ruling class is laying bare the real nature of the capitalist system, which provides for the vast enrichment of the few at the expense of the many. Securing the most fundamental requirements of civilized society requires the overturning of this system and its replacement with socialism.
Niqnaq 