Helping those who need it most during the conronavirus lockdown
A financial advisor friend of mine sent this update to his clients last week:
“Yesterday, what got lost in the panic selling was the Federal Reserve’s announcement that $1.5T will be injected into the banking system…. this new money has to go somewhere…. 1) goods, 2) services and 3) assets. Do you think that over the next few months, we the people will consume more goods and services? Apparently not since we will all be hunkering down in our basements. The only place the new money can go is to purchase assets, meaning stocks, bonds, and real estate. The public health situation may get worse, possibly much worse, but the Fed has already primed the market for a comeback at some point…”
I wrote back to him: “What a relief to know that while the Adminstration’s response to the health crisis has been inept, and Congress is squabbling over a tax package, that our leaders have moved swiftly to protect what matters most — stock prices. Wow.”
He replied: “Haha Tim. After all, we are a proud capitalist country. Capital always comes first.”
But let’s not forget: Capital is actually controlled by capitalists — people who are business owners and investors. These people — the one percent, maybe even the 10% — have done well for themselves over the 11-year bull market. So, while it’s not surprising that $1.5 trillion will swiftly be deployed to rescue the market, aren’t there some ways that rescue money could flow to those who actually need it most: the wage-earners who will be out of work during the conronavirus pandemic?
Here’s three simple ideas. I bet there are hundreds more:
1.For laid off workers who will not qualify for unemployment insurance, including part time and gig-workers: mandate continuing full wage payments by their employers (corporations should be able to borrow from that $1.5 Trillion pool for this purpose). By enabling the labor force to continue to pay their bills, they will prevent economic collapse and in the long run, their businesses will recover their stock prices quicker. It’s a better investment than buying their own stock with their share of the $.15T — if all companies do it.
2. For renters and small businesses who can’t pay their rent: Legislation not just prohibiting eviction, but waiving of whatever portion of rent cannot be paid. Landlords will take a hit in the short run. But again, if thousands are evicted in a city because they can’t pay the rent — who is going to move in? Properties will go empty, and landords will lose in the end. Besides, let’s face it, property owners are mostly better off than their tenants. It’s the renters who should be getting the help.
3. For homeowners who can’t pay their mortgages: Not just waiving interest payments, but the full monthly payments for those who have lost income, so that they do not fall into a debt trap. Just postponing payments is not enough for people struggling to get by month to month; they will never recoup lost income. If you push too many people into default, you get a housing loan crisis as in 2008. This plan to waive payments could include student and small business loans too. The burden should be borne by the banks who hold the mortgages and will benefit the most from avoiding a crisis — especially since they are the institutions who are getting that $1.5 trillion right now.
What other ideas can we come up with to ensure that $1.5 trillion helps the wage earners who are actually going to need it, and not the capitalists who will just use it to take care of Capital? Please contribute your ideas.