Pindo pandemic cover-up responsible for the deaths of tens of thousands
Andre Damon, WSWS, May 22 2020
Trump in the Rose Garden, Mar 13 2020. (Photo: Evan Vucci/AP)
On Wednesday, researchers from Columbia University released a study showing that the massive Pindo death toll, now approaching 100k, is a direct consequence of decisions made by the Trump administration. The study, posted on medRxiv.org, found that if the United States had begun social distancing and other control measures just two weeks earlier, it would have saved the lives of 54k people. The implementation of such measures one week earlier would have saved 36k lives. These figures quantify the consequences of the Trump administration’s efforts in January and February to minimize the threat posed by the pandemic. Despite clear evidence and warnings by scientists, Trump and his cabinet members systematically downplayed the significance of the disease. As late as Feb 28, Trump was still claiming that the coronavirus “is going to disappear” like “a miracle.” Trump condemned those saying that COVID-19 was rapidly spreading throughout the country, declaring:
This is their new hoax.
But within the government, leading scientists had been ringing the alarm for nearly two months in a futile attempt to make the White House take the most basic measures to prepare for a major pandemic. Rick Bright, the former director of the Biomedical Advanced Research and Development Authority, in a whistleblower complaint:
Public health officials were fully aware of the emerging threat of COVID-19 by early Jan 2020.
In a subsequent interview, Bright added:
I knew that all of the signs for a pandemic were present. A novel virus, causing significant mortality, and spreading. All the signs were there. It was just a matter of time before that virus left China.
Bright’s statements tear apart the administration’s claims that “no one could have predicted” the pandemic, and that to the extent the response was delayed in Pindostan, it was because China lied about the spread of the disease. Rather, Bright said:
The Trump administration was intent on downplaying this catastrophic threat.
The deliberate efforts by the federal government to muzzle scientists and downplay the disease, combined with massive delays in the roll-out of testing, led states to begin restrictions far too late. New York State implemented its stay-at-home order on Mar 22, more than two months after community transmission began in Pindostan in mid-January. Lockdowns in most Pindo cities came three and a half months after Chinese researchers discovered the virus, prompting fears of a global pandemic. While the Trump administration and the media blame China for delaying the release of information, it now emerges that as many as 50k deaths were caused by the White House’s decision to postpone as long as possible the ordering of a lockdown. Chinese scientists announced a cluster of unexplained illnesses on Dec 31, and the announcement was widely reported in Pindostan, including by Reuters, the Associated Press and the NYT. The WSWS, on the basis of only publicly available data, was able to warn on Jan 24 that “evidence has emerged that person-to-person infection is occurring.” Four days later, the WSWS wrote:
The outbreak has exposed the enormous vulnerability of contemporary society to new strains of infectious disease, dangers for which no capitalist government has adequately prepared.
But for months, Pindo boxtops did nothing to prepare for the coming pandemic. It was not until nearly eight weeks after the first public statements by Chinese health officials that any systematic testing for COVID-19 began in Pindostan. Even as Trump did nothing to prepare for the spread of COVID-19, he imposed a travel ban on China against the advice of the WHO and his own scientific advisors. Within the federal government, Bright and other scientists within the administration were desperately warning that a travel ban would not prevent the disease from entering Pindostan. Why, despite the warnings of scientists within his administration, did Trump implement a purely cosmetic measure, whose aim would be to construct the narrative that COVID-19 would be kept out of the country?
Driving the White House’s response to the pandemic from the beginning was not the threat of COVID-19 to human lives, but its impact on the stock market. The White House was well aware that the pandemic would have a devastating impact. But it would come under conditions where Wall Street was already under tremendous strain. The markets had been artificially inflated through years of ultra-low interest rates and “quantitative easing,” which had fueled a massive rise in indebtedness that was undermining corporate profitability and threatening a collapse of the already wildly inflated stock market. Trump and his advisers knew that the impact of the pandemic would trigger a market sell-off, which could only be contained and reversed through the infusion of trillions of dollars in cash from the Fed and Treasury. In order to gain time, the White House suppressed information and misled the public while this bailout could be prepared. An article by Edward Luce in the FT last week provided a window into this process. Explaining the thinking of the Trump administration, Luce wrote:
Nothing could be allowed to frighten the Dow Jones. Any signal that Pindostan was bracing for a pandemic, including taking actual steps to prepare for it, was discouraged. “Jared had been arguing that testing too many people, or ordering too many ventilators, would spook the markets and so we just shouldn’t do it,” says a Trump confidant who speaks to the president frequently. “That advice worked far more powerfully on him than what the scientists were saying. He thinks they always exaggerate.”
Amid the public silence, there was furious activity in the background as lawmakers were preparing what would be the largest government bailout of major corporations in history. The Trump administration was playing for time, keeping the public in the dark while a complex program for bailing out Wall Street could be put into motion. This time was used to write what would become an 800-page bill known as the CARES Act, which created the framework for a multitrillion-dollar bailout of the financial system by the Fed and the funneling of hundreds of billions of dollars into major corporations from the Treasury. Senate Majority Leader Mitch McConnell introduced the bill on Mar 25. Within two days, the CARES Act passed the Senate with a unanimous vote and the House with a voice vote. It was signed into law the same day. In other words, the largest redistribution of public funds in human history took just 48 hours. An article in ForeignAffairs.com notes:
In the coming months, the bonanza of public spending will blur the lines, never clear to begin with, between the public and private sectors and transfer a large portion of the global economy onto government balance sheets. This level of spending has no precedent in history. Not even close. Not in war. Not in peacetime. Not ever.
As soon as this bailout was secured, the media immediately changed its tone. It turned from focusing on images of mass death and overcrowded hospitals to “hopeful signs” and “silver linings” in order to declare that the pandemic was all but over and that workers should get back on the job. Even as 1,500 Pindos continue to die every day from COVID-19, all 50 states have reopened businesses, sending workers back to work in unsafe conditions and setting the stage for a massive resurgence of the disease. The same total disregard for human life that prompted the White House to downplay the pandemic and hamper the federal response is at work in the back-to-work campaign. Amid warnings by CDC Director Robert Redfield that Pindostan faces a major resurgence of COVID-19, Trump declared yesterday:
Whether it’s an ember or a flame … we’re not closing our country.
In other words, no matter how high the death toll climbs, the needs of society will not be allowed to interfere with the profit-making of Wall Street. The priority of the government will continue to be the interests of financial oligarchy, not saving lives. This is why the fight against the pandemic must be waged not only on the medical front, but on the political front as well. The struggle against COVID-19 is inseparable from the broadest possible fight against the criminal policies of the Trump administration and its supine enablers in the Demagog Party. As the SEP wrote in its recent statement, workers must form rank-and-file safety committees in every factory, office and workplace. These committees, democratically controlled by workers themselves, should formulate, implement, and oversee measures that are necessary to safeguard the health and lives of workers, their families and the broader community. There can be no “business as usual!” The pandemic exposes the urgent necessity for a complete restructuring of the processes of production, distribution and economic activity in general. The lives of working people and their families must not be sacrificed in the interests of corporate profits and the private wealth of billionaire oligarchs. We urge all those who agree with these demands to draw the necessary political conclusions and take up the fight for socialism.
NY Governor Cuomo shields nursing homes from prosecutions related to 5.6k COVID-19 deaths
Erik Schreiber, WSWS, May 22 2020
Governor Andrew Cuomo. Photo: Zack Seward
At a press briefing on Sunday, Governor Andrew Cuomo of New York asserted that the COVID-19 deaths of elderly residents of nursing homes in the state were inevitable and the privately owned, for-profit facilities should not be held legally liable. He falsely claimed that not a single death from COVID-19 in New York State was preventable, and that the state was providing the best possible care and instituting the necessary protective measures in response to the pandemic. During the briefing, a reporter described two people at the same facility who died a few weeks after being denied coronavirus testing. When the reporter asked what Cuomo would say to their relatives, who are demanding accountability, he said:
My response is this, and I’m having these conversations all day long with people who’ve lost someone. We had 139 people yesterday who died in hospitals. How do we get justice for those families of those 139 deaths? Who can we prosecute for those 139 deaths? Nobody! Nobody! Mother Nature? God? Where did this virus come from? People are going to die by this virus, that is the truth … We have the best hospital system on the globe, best doctors, best nurses, who responded like heroes … The hospital system wants for nothing … and still people died. Older people, vulnerable people are going to die from this virus. That is going to happen despite whatever you do, because with all our progress as a society, we can’t keep everyone alive.
These statements reflect a broad consensus in the ruling class that elderly people, since they no longer are productive workers, represent an undesirable expense and are not worth saving. Cuomo’s assertion that “nobody” should be prosecuted for these needless deaths is really an admission that he will prevent such prosecutions. In late March, when the devastating implications of the novel coronavirus outbreak could no longer be ignored, Cuomo’s aides inserted language into New York State’s final budget bill that grants nursing homes immunity to lawsuits resulting from their failure to protect residents from the pandemic. Nursing home workers have also been infected and died as a result of unsafe conditions. The industry had lobbied for this provision, which will allow it to escape accountability for maintaining inadequate staffing and insufficient contamination control at its facilities. This measure is consistent with the pro-corporate orientation of the Cuomo administration and the state legislature. Senate Thug leaders, backed by the Trump White House, have declared that a “bottom line” precondition for any federal aid to state and local governments bankrupted by the collapse of tax revenues is the enactment of legal immunity for corporations from suits filed on behalf of workers sickened or killed as a result of inadequate on-the-job protection from the virus. Cuomo’s actions and words make clear that this call for a legal green light for companies to kill workers is supported by the Demagogs.
The “best hospital system on the globe” and “best doctors, best nurses” have been denied personal protective equipment. As a result, at least 71 health-care workers have died in New York State alone, including many emergency medical technicians, doctors and nurses, especially at public hospitals in the hardest-hit working-class areas of Brooklyn and Queens. One doctor and one EMT who worked in some of the worst-affected areas tragically committed suicide last month. Throughout the pandemic, health care workers at hot spots like Elmhurst Hospital in Queens have described desperate conditions more akin to those of a third world country than an advanced industrial economy. One nurse in the Bronx told the WSWS that her hospital had run out of IV pumps and that another hospital in Manhattan had run out of oxygen. The deaths in nursing homes are particularly criminal. While elderly people are certainly more vulnerable to diseases like the coronavirus, it was the ruling class’s policy of malign neglect that allowed the virus to ravage nursing homes. Between Mar 1 and May 1, more than 4.8k people died of confirmed or presumed COVID-19 infection at 351 of New York’s 613 nursing homes, according to the state’s data. Considering the inadequate level of testing, these figures clearly underestimate the true mortality from infection. State officials recently announced more than 1.7k previously undisclosed deaths at nursing homes and adult care facilities. The official toll of 5.6k is believed to be a vast underestimate of the real death toll. The largest cluster of nursing home deaths in the state has occurred in NYC, an epicenter of the pandemic in Pindostan. 98 of the 705 residents of the Isabella Geriatric Center in Manhattan have died. 46 of the deceased had tested positive for COVID-19, and 52 are suspected to have had the virus. Because local funeral homes could not pick up bodies quickly enough, the center stored them in a refrigerated truck that it hid under a tarp. An official at the center admitted that insufficient staffing, inadequate testing and insufficient PPE for employees had contributed to the death toll. The same problems affect nursing homes throughout the state and the entire country.
The state deliberately tried to cover up the disaster unfolding in nursing homes for months. Even though state health officials had been tracking how much hand sanitizer nursing homes had, they did not begin to track deaths related to COVID-19 at these facilities until Apr 16, a full month into the pandemic in Pindostan. This glaring omission was not an oversight, but a conscious calculation that the elderly, since they no longer are productive workers, are not worth protecting. In the meantime, because many nursing homes do not have morgues, residents’ bodies were left in their rooms. Cuomo bears direct responsibility for this devastation. In March, the governor ordered that elderly patients be sent back to nursing homes, even after they had tested positive for COVID-19. He reversed his decision only after a public outcry. While the elderly are especially vulnerable, the virus has killed many otherwise healthy people in the prime of their lives. It has caused sudden strokes in people in their 30s and 40s. These strokes result from clotting in the large arteries and can cause serious neurological damage, disability or death. Children have developed a multi-system inflammatory disorder after infection with COVID-19. This emerging condition can lead to heart attack and death. There have been more than 100 cases of this disorder in New York. New York state’s high death toll has resulted directly from the federal and state governments’ belated response to the pandemic, despite repeated warnings by the Chinese government and the WHO.
Cuomo continues to cultivate his tough-guy, take-charge persona to cover up the fact that he took no serious measures to prepare the state for the pandemic, just as Trump ignored early warnings and downplayed the risk to public health. It was not until this month that Cuomo ordered nightly shutdowns of the NYC subway and cleaning of the cars. In the meantime, the subway had become a major vector for spreading the virus throughout the city and state, resulting in the deaths of at least 127 transit workers. The schools were not closed in March, when teachers threatened to shut them down. Since then, more than 100 educators and several schoolchildren have died from the virus. Cuomo’s statements are lies and testify to his utter indifference toward the tens of thousands of lives that have been lost, to say nothing of those that will be lost in the coming months. Since the beginning of the pandemic, at least 28,636 people have died in New York State, only 4k people fewer than in all of Italy, and more than in France and most other countries. His remarks reflect the de facto adoption of the policy of “herd immunity” that now forms the basis for the “reopening of the economy” in Pindostan and many other countries. Cuomo is prepared to allow the virus to rampage through the population of New York in the months to come. No less than Trump, Cuomo advocates on behalf of Wall Street which, having received a multi-trillion-dollar bail-out, demands that workers return to their jobs to continue generating profits. This premature return to work threatens to result in mass death and is fueling opposition in the working class, including at auto factories, Amazon warehouses, garment factories and commercial fruit orchards.
University team predicts doubling or tripling of Pindo death toll over the next two months
Benjamin Mateus, WSWS, May 22 2020
Map of US COVID-19 cases 21 May 2020
A report issued yesterday by London’s Imperial College COVID-19 Response Team offers a startling analysis of the expansion of the pandemic in Pindostan as a result of the rapid resumption of social and economic activity demanded by the Trump administration and big business, predicting the death toll by the end of July could reach two to three times what it is today, or nearly 300k lives lost. The ICL report estimates the national prevalence of coronavirus at 4.1% of the population, with wide variations between states, adding:
Our estimates suggest that the epidemic is not under control in much of Pindostan. As of May 17 2020, the reproduction number is above the critical threshold (1.0) in 24 states. Higher reproduction numbers are geographically clustered in the South and Midwest, where epidemics are still developing, while we estimate lower reproduction numbers in states that have already suffered high COVID-19 mortality, such as the Northeast. These estimates suggest that caution must be taken in loosening current restrictions if effective additional measures are not in place.
They write that with the relaxation of social distancing, the community transmission will accelerate again. They estimate that over a period of two months, the cumulative deaths could be two to three times higher than present numbers holding all things constant. They also highlight that Pindostan needs to establish a robust public health program where rapid testing, contact-tracing and vigilance to social behaviors can offset the resurgence with the “loosening of social distancing.” In their summary they remark:
Overall, we show that while all Pindo states have substantially reduced their reproduction numbers, we find no evidence that any state is approaching herd immunity or that its epidemic is close to over.
Pindostan presently has over 1.6m cases, with over 25k new cases yesterday. The number of fatalities is expected to exceed 100k by this weekend. Many in the media have taken note of the uptick in the daily deaths which have exceeded 1k over the last four straight days. The FT also makes the same observation as the Imperial College report, that the reproduction rate in half of the states is over the value of one, which indicates the pandemic is growing and would accelerate in these regions. The highest rates recorded are in Arizona, Colorado and Texas. The mayor of Montgomery, Alabama, said at a news conference on Wednesday:
Right now, if you’re from Montgomery and you need an ICU bed, you’re in trouble.
Thug Governor Kay Ivey had allowed businesses and churches to reopen this month. Pres Trump delivered remarks on Thursday afternoon at the Ford Rawsonville Components Plant in Ypsilanti, Michigan, in an attempt to shore up his standing in the critical re-election state, where he trails Biden according to most polls. He continued to inflame Pindo-Chinese relations by blaming the Chinese government for the pandemic. His attempt to position himself as the champion of the auto workers by sending them back to work is a deadly dangerous proposition for the working class. Factories, warehouses and office buildings provide the perfect environment for the resurgence of COVID-19. This time, there will be no call for another lockdown if deaths surge. On Wednesday, all 50 states had started the process of lifting restrictions, not because conditions have by any measure improved, or because guidance provided by health experts suggests it is now safe to return to work, but purely by the need to restore the profit-making capacity of corporate Pindostan. The Wall Street forecasting firm HIS Markit is predicting that the Pindo GDP will sink by 40% in the second quarter. According to some estimates, half of all small businesses will be out of cash within a month. Jonathan Parker, a professor of finance at MIT, told CNBC:
If a second wave of infections hits, we will be coming out of a bad GDP shutdown with a high unemployment rate and a debt-to-GDP ratio greater than 100% and projected deficits for this year are already $5k per household. I think a second wave of infections would be an even more major economic disaster than the current one.
In their attempt to pry open the economy, there is also a simultaneous effort to suppress the real statistics of the pandemic that people have been following carefully to make sense of the magnitude of the disaster. The firing of Rebekah Jones in Florida, a scientist who created the coronavirus tracking database for the state, was not an exception but standard operating procedure to censor this information. In an article published on Tuesday, AP wrote:
States accused of manipulating COVID-19 statistics to make the situation look better. As large parts of Pindostan ease their lockdown against the coronavirus, public health officials in some states are being accused of bungling infection statistics or even deliberately using a little sleight of hand to make things look better than they are.
Virginia, Texas, Vermont and Georgia have been cited as states involved in such charlatanry. By way of an example, Georgia, one of the earliest states to lift restrictions, published a graph implying declining COVID-19 cases in the most affected counties. However, these entries were arranged in descending magnitude instead of chronological order. This was done to suggest a two-week downward deflection in their numbers. Georgia State Representative Jasmine Clark, who has a doctorate in microbiology, aptly remarked:
The graph is a prime example of malfeasance. Science matters, and data manipulation is not only dangerous but leads to distrust in our institutions.
In an attempt to provide a veneer of expertise, the director of the CDC, Robert Redfield, gave press briefings on Tuesday, assuring reporters that the country is ready to open. Without any credible evidence or scientific rationale, he suggested that the present spread of the coronavirus in the southern hemisphere is based on seasonal variations, and warned:
Pindostan will have to increase its disease-tracking capabilities rapidly in the next few months to avoid another public health crisis as seasonal flu coincides with a second wave of COVID-19.
He also admitted he had no real concern that several states were moving faster than his guidelines indicated, yet by his own admission the CDC presently lacks the infrastructure for a modernized data system, as well as the ability to monitor contact-tracing and vaccine distribution. According to Redfield, the states are required to present a plan by the end of May for continued testing and contact-tracing. The CDC is looking to increase contact-tracing personnel across the nation by between 30k and 100k, but how many contact tracers there are remains unknown because of the fractured and decentralized character of Pindostan’s underfunded public health systems. Redfield admitted the alarming scale of the coming “second wave,” for which neither the federal government nor any of the states are prepared, with the words:
The federal government will likely need to invest anywhere between an additional $3t to $6t in preparations to combat a potential second wave.
Under the policy of seeking “herd immunity,” the working class is being sent to be slaughtered.
Pindo unemployment claims approach 40m since March
Niles Niemuth, WSWS, May 22 2020
A man looks at signs of a closed store due to COVID-19 in Niles, Illinois, May 21 2020. (Photo: Nam Y Huh/AP)
The Pindo Dept of Labor reported on Thursday that more than 2.4m Pindos applied for unemployment insurance last week, bringing the total number of new claims to 38.6m since mid-March, when social distancing measures and statewide stay-at-home orders were first implemented in an effort to slow the spread of the coronavirus. Even with the push by the Trump administration since then to reopen the economy and the easing of lockdown orders in all 50 states, despite a continued rise in COVID-19 infections and deaths, Pindostan marked its ninth straight week in which more than 2m workers filed for unemployment. While this is down from the peak at the end of March when 6.8m applied for unemployment insurance, it still dwarfs the worst weeks of the Great Recession in 2008. It is expected that the official unemployment rate for May, which is to be reported by the federal government in the first week of June, will approach 20%, up from 14.7% last month. This is a significant undercount, with millions of unemployed immigrants unable to apply for benefits, and many other workers who are not currently looking for work and therefore are not counted as unemployed. Fortune magazine estimates that real unemployment has already hit 22.5%, which is nearing the peak of unemployment reached during the Great Depression in 1933, when the rate rose above 25%. Millions more are expected to apply in the coming weeks, pushing the numbers beyond those seen during the country’s worst economic crisis.
But even these figures do not capture the extent of the crisis now unfolding across the country. Millions have been blocked for weeks from applying for unemployment compensation because of antiquated computer systems, and a significant share of those who have applied have been denied any payments. On top of this there are significant delays in processing applications in multiple states, including Indiana, Missouri, Wyoming and Hawaii. Meanwhile, Florida, which has some of the most stringent restrictions, has refused to extend its paltry three-month limit on payments for the few who manage to qualify. Sparked by the pandemic, the greatest economic crisis since the 1930s is already having a devastating impact on the millions who have seen their jobs suddenly disappear, while millions more will see wages, benefits and hours dramatically curtailed whenever they are able to return to work. Optimistic projections that the Pindo economy would quickly bounce back once stay-at-home orders were lifted are now becoming much gloomier. A University of Chicago analysis from earlier this month projects that 42% of lost jobs will be permanently eliminated. At the current record number, this will mean a destruction of 16.2m jobs, nearly double the number of jobs which were lost during the Great Recession just over a decade ago. Nicholas Bloom, a Stanford University economist and one of the co-authors of the study, told the NYT:
I hate to say it, but this is going to take longer and look grimmer than we thought.
A survey by the Census Bureau carried out at the end of April and beginning of this month found that 47% of adults had lost employment since Mar 13 or had someone in their household do so, and 39% expected that they or someone else in the home would lose their job in the next month. Nearly 11% reported that they had not paid their rent or mortgage on time and more than 21% had slight or no confidence that they would do so next month. With millions missing their rent or mortgage payments, tens of thousands of families will be thrown out on the street in the coming weeks and months, leading to a dramatic rise in homelessness even as the coronavirus continues to spread. While many states took steps in March to place a moratorium on evictions, and eviction notices were unable to be filed due to court closures, those measures are now expiring and courts are reopening. The Oklahoma County Sheriff announced Tuesday via their Twitter page that the department would resume enforcing evictions on May 26. Nearly 300 eviction cases were filed in Oklahoma City between Monday and Tuesday. This process is being repeated in cities and counties across the country. Evictions are also set to resume in Texas next week, where many families were ineligible for aid due to the undocumented status of one or another parent. The CARES Act provision, which blocks evictions from properties with federally subsidized mortgages, expires on Jul 25. In Texas this only accounts for one-third of homes.
Meanwhile, another wave of layoffs and furloughs is expected by the Congressional Budget Office at the end of June, when the multi-billion-dollar Payment Protection Program (PPP) expires. Sold as a bailout which would help small businesses keep workers on their payroll in the course of necessary shutdowns, the PPP was in fact a boondoggle for large corporations, their subsidiaries and those with connections to the Trump administration. Many small business owners have not seen any aid, and many do not qualify for loan forgiveness. Amid historic levels of social misery in the working class, times have never been better for those at the heights of society, with America’s billionaires adding $434b to their total net worth since state lockdowns began. Financial markets have soared, underwritten by $80b/day from the Fed. Amazon CEO Jeff Bezos, who is rescinding a $2/hr hazard pay increase for his warehouse workers at the end of the month, led the pack, increasing his personal wealth by $34.6b since the onset of the pandemic. Facebook CEO Mark Zuckerberg was close behind, adding $25b to his fortune. Tesla CEO Elon Musk, who reopened his California auto plant in defiance of state regulators and with the support of Pres Trump, saw a 48% increase in his wealth to $36b in just eight weeks as the stock market rebounded from its collapse. All told, the nation’s 620 billionaires now control $3.382t, a 15% increase in two months.
Further details emerge on the extent of the mid-March financial crisis
Nick Beams, WSWS, May 22 2020
An article in the WSJ earlier this week provided further details on how close financial markets came to a meltdown in the middle of March. Entitled “The Day Coronavirus Nearly Broke the Financial Markets,” the article recorded how markets in financial assets, usually regarded as being almost as good as cash, froze when “there were almost no buyers.” It said:
The financial system has endured numerous credit crunches and market crashes, and the memories of 1987 and 2008 crises set a high bar for marker dysfunction. But long-time investors say mid-March of this year was far more severe in a short period. Moreover, the stresses to the financial system were broader than many had seen.
In testimony and interviews, Fed chairman Jerome Powell has been at pains to emphasise that regulatory mechanisms and policies introduced after the 2008 crisis have strengthened the financial system. In his interview on CBS 60 Minutes last Sunday, he downplayed the threat of unemployment reaching levels not seen since the Great Depression, saying:
In the 1930s, the financial system really failed, but today our financial system is strong. It has been able to withstand this. And we spent ten years strengthening it after the last crisis. So that’s a big difference.
In fact, Powell’s reassurances are contradicted by the Fed’s own Financial Stability Report issued last Friday. Focusing on the mid-March crisis, it noted:
While the financial regulatory reforms adopted have substantially increased the resilience of the financial sector, the financial system nonetheless amplified the shock, and financial sector vulnerabilities are likely to be significant in the near term.
The events in mid-March revealed what has actually taken place. While the Fed has taken limited measures to try to curb some of the riskier activities of the banks that sparked the 2008 crash, the dangers have simply been shifted to other areas of the financial system. The speculation of the banks may have been curtailed somewhat, but it is now being carried out by hedge funds and other financial operators. They are financed with ultra-cheap money provided by the Fed through its low-interest rate regime and market operations, such as quantitative easing and, more recently, its massive interventions into the overnight repo market. The WSJ report, based on interviews with Wall Street operatives, provided some insights into how the financial system “amplified” the shock of the pandemic. Ronald O’Hanley, CEO of the investor services and banking holding company State Street, recounted the situation that confronted him on the morning of Monday, Mar 16. On Sunday evening, before markets opened, the Fed had announced it was cutting its base rate to zero and was planning to buy $700 billion in bonds, but with no effect. According to the report:
A senior deputy told O’Hanley that corporate treasurers and pension managers, panicked by the growing economic damage from the COVID-19 pandemic, were pulling billions of dollars from certain money-market funds. This was forcing the funds to try to sell some of the bonds they held. But there were almost no buyers. Everybody was suddenly desperate for cash. Rather than take comfort from the Fed’s extraordinary Sunday evening actions, many companies, governments, bankers and investors viewed the decision as reason to prepare for the worst possible outcome from the coronavirus pandemic. The result was that a downdraft in bonds was now a rout. It extended into what had been regarded as the most secure areas of the financial system. Companies and pension managers have long relied on money-market funds that invest in short-term corporate and municipal debt holdings, considered safe and liquid enough to be classified as ‘cash equivalents.’ But that Monday, investors no longer believed certain money funds were cash-like at all. As they pulled their money out, managers struggled to sell bonds to meet redemptions. So severe was the crisis that Prudential, one of the largest insurance companies in the world, was also struggling with normally safe securities.
The article provided a striking example of how, when a fundamentally dysfunctional and rotting system seeks to undertake a reform, it generally only exacerbates its underlying crisis. This phenomenon has been long known in the field of politics, but the events of mid-March show it applies in finance as well. The WSJ report stated:
On the Monday morning when the crisis broke, Vikram Rao, the head of the debt-trading desk at the investment firm Capital Group, contacted senior bank executives for an explanation as to why they were not trading, and was met with the same answer. There was no room to buy bonds and other assets and still remain in compliance with tougher guidelines imposed by regulators after the previous financial crisis. In other words, capital rules intended to make the financial system safer were, at least in this instance, draining liquidity from the markets. The crisis had a major impact on investors who had leveraged their activities with large amounts of debt, one of the chief means of accumulating financial profit in a low-interest rate regime. The slump in mortgage bonds was so vast it crushed a group of investors that had borrowed from banks to juice their returns: real-estate investment funds.
The Fed’s actions have quelled the storm, at least temporarily. But it has only done so by essentially becoming the backstop for all areas of the financial market—Treasury bonds, municipal debt, credit card and student loan debt, the repo market and corporate bonds, including those that have fallen from investment-grade to junk status. And, as Powell made clear in his “60 Minutes” interview, the Fed plans to go even further if it considers that to be necessary. He said:
Well, there’s a lot more we can do. I will say that we’re not out of ammunition by a long shot. No. There’s really no limit to what we can do with these lending programs that we have. So there’s a lot more we can do to support the economy, and we’re committed to doing everything we can, as long as we need to.
The claim the Fed is supporting the “economy” is a fiction. It functions not for the economy of millions of working people, but as the agency of Wall Street, ready to pull out all the stops so that the siphoning of wealth to the financial oligarchy which it has already promoted, can continue. An indication of what “more” could involve is provided in the minutes of the Fed’s Apr 28–29 meeting. There was a discussion on whether the Fed should organise its purchases of Treasury securities to cap the yield on short and medium-term bonds. This is a policy employed by the Bank of Japan that has also recently been adopted by the Reserve Bank of Australia. No immediate decision was reached, but the issue is certain to be raised again. Over the next few months, the Treasury will issue new bonds to finance the operation of the CARES Act, which has provided trillions of dollars to prop up corporations while providing only limited relief to workers. By itself, the issuing of new debt would lead to a fall in the prices of bonds, because of the increase in their supply, leading to a rise of their yields and promoting a general rise in interest rates, something the Fed wants to avoid at all costs in the interests of Wall Street. The only way the Fed can counter this upward pressure is to intervene in the market to buy bonds, thereby keeping their yield down. This would formalise what is already de facto taking place, where one arm of the capitalist state, the Treasury, issues debt while another arm, the Fed, buys it. This would further heighten the mountain of fictitious capital which, as the events of mid-March so graphically revealed, has no intrinsic value and is worth essentially zero.
The ruling class cannot restore stability to the financial system by the endless creation of still more money at the press of a computer button. Real value must be pumped into financial assets through the further intensification of the exploitation of the working class and a deepening evisceration of social programs. Financial crises are presented in the media and elsewhere as being about numbers. But behind the economic and financial data are the interests of two irreconcilably opposed social classes: the working class, the mass of society, and the ruling corporate and financial oligarchy whose interests are defended by the state of which the Fed is a crucial component. As 2008 demonstrated, what emerges from a financial crisis is a deepening class polarisation. That will certainly be the outcome of the mid-March events. A massive social confrontation is looming, in which the working class will be confronted with the necessity to fight for political power in order to take the levers of the economy and financial system into its own hands. This crisis was already developing, long before the pandemic arrived on the scene.
Niqnaq 