Federal Reserve Chair Jerome Powell and San Francisco Fed President Mary Daly both recently denied that the Federal Reserve’s policies create economic inequality. Unfortunately for Powell, Daly, and other Fed promoters, a cursory look at the Fed’s operations shows that the central bank is the leading cause of economic inequality.
The Federal Reserve manipulates the money supply by buying and selling government securities. This means that when the Fed decides to pump money into the economy, it does so by putting it in the pockets of wealthy, and oftentimes politically-connected, investors who are able to spend the new money before the Fed’s actions result in widespread inflation. Wealthy individuals also tend to be among the first to invest in the bubbles that form when the Fed distorts interest rates, which are the price of money. These investors may lose some money when the bubble bursts, but these losses are usually outweighed by their gains, so they end up profiting from the Fed-created boom-bubble-bust cycle.
In contrast, middle-class Americans lose jobs as well as savings, houses, and other assets when bubbles burst. They will also not benefit as much as the rich and well-connected from government bailouts and stimulus schemes. Middle- and working-class Americans also suffer from a steady erosion of their standard of living because of the Fed’s devaluation of the currency. This is the reason why so many Americans rely on credit cards to cover routine expenses. The Federal Reserve is thus the reason why total US credit card debt is almost one trillion dollars.
Big-spending politicians are also beneficiaries of the fiat money system. The Fed’s purchases of US debt enable Congress to massively increase welfare and warfare spending without increasing taxes to politically unacceptable levels. The people pay for the welfare-warfare state via the Fed’s hidden and regressive inflation tax.
Low interest rates also benefit politicians by keeping the federal government’s interest payments low. This is an unstated reason why the Fed will keep interest rates near zero or even lower interest rates below zero.
In response to the government-caused economic collapse, the Federal Reserve increased the money supply by about a trillion dollars from mid-April to early June. In contrast, it took the Fed all of 2019 to grow the money supply by 921 billion dollars. Even before the lockdown, the Fed was massively intervening in the economy in a futile attempt to prevent economic crisis.
A coming crisis will likely be triggered by a collapse in the dollar’s value and a rejection of the dollar’s world reserve currency status. The economic collapse will be worse than the Great Depression. This will result in widespread violence along with government crackdowns on liberties, accelerating the US slide into authoritarianism. The only way to avoid this is for Congress to make drastic cuts in spending — starting with defunding the military-industrial complex — and to audit then end the Fed.
The eruption of government red ink literally defies imagination. The deficit figure topped $863 billion during the month of June alone.
Indeed, the number is so massive that it’s hard to put it in context. But consider this: When your editor joined the Reagan campaign in the summer of 1980, the public debt was also $863 billion and it had taken 192 years and 39 presidents to get there.
So during the last 30 days, the clown brigade which passes for a government in Washington has actually borrowed nearly two centuries worth of debt!
Indeed, the numbers for June are so bad as to give ugly an entirely new definition:
June receipts of $242 billion were down by 28% or –$92 billion from last year;
June outlays totaled $1.105 trillion, representing a +$713 billion or 182% increase from last year;
Leading the charge was SBA outlays of $511 billion compared to $80 million last year – and, yes, that’s the PPP boondoggle and it amounts to a 4,400% gain;
Not far behind was unemployment benefits at $116 billion compared to $2 billion last year;
There was also a $70 billion increase in the cost of student loans owing to CARES act repayment deferrals and an adjustment for massively higher student loan defaults in the future than had been previously assumed;
And the red ink total for June, which is usually a low deficit month due to estimated tax payments, rose from $8 billion last year to the aforementioned $863 billion.
But the issue is far more than the humongous numbers. There is now at work a trifecta of baleful forces that is literally destroying any semblance of fiscal discipline in Washington.
The first of these, of course, is the Fed. It has so completely and recklessly monetized the ballooning public debt that Washington officialdom and politicians are getting zero honest price signals from the bond market. In any practical sense the Brobdingnagian amounts of money they are borrowing is perceived as free, and rightly so.
After all, as of this morning, 90-day, 2-year and 10-year money costs the Treasury only 0.14%, 0.17% and 0.58%, respectively.
Secondly, there has been what amounts to a highly improbable “doctors plot” to take down the already debt-entombed US economy with an unprecedented regime of quarantines, economic locksdowns and drastic social regimentation in response to a virus that is really only an abnormal medical threat to the old and infirm.
The fact that the lockdowns are so wildly disproportionate to the 5%-of-population threat posed by the Covid is attributable to the rampant Trump Derangement Syndrome (TDS) among the Dems, the MSM and the permanent Washington ruling class. They are so rabid with TDS that they have mindlessly cheered on the health care apparatchiks, mayors and governors in a blunderbuss attack on the US economy that pales all prior recessions in severity.
And, thirdly, the elected politicians – beginning with the Donald – have stood idly by during this economy-wrecking campaign, deluded by the belief that Washington has the responsibility and means to fund a virtual make-whole for every worker and business in America that has suffered a loss of income and cash flow.
That is to say, America has fallen under the dictatorship of an unaccountable and unconstitutional Virus Patrol. But there has been almost zero political resistance to its insanities such as closing schools, bars, gyms and air travel because the fiscally incontinent policy-makers of Washington have stood up multi-trillion coast-to-coast soup-lines to ameliorate the damage and pain.
But for crying out loud, this jerry-built trifecta of madness cannot possibly be sustained. Your can’t print $3 trillion of fiat credit in just four months as the Fed has done and get away with it. Nor can you spend $7 trillion and collect only $3 trillion as Uncle Sam will do this year and not expect dire repercussions down the road.
And, for that matter, you can’t run-up the NASDAQ to an all-time high in the face of this fiscal, monetary and economic mayhem, and on the strength of just ten stocks, and not expect that a thundering financial collapse lies just around the corner.
Indeed, as David Rosenberg pointed out this AM, the top 10 stocks in the NASDAQ Composite (Apple, Microsoft, Amazon, Facebook, Google, Nvidia, Tesla, Intel, Netflix, Adobe) now make up 48% of the index’s market cap, and an incredible 58% of the NASDAQ 100.
So what you see in the chart below is an accident waiting to happen. The NASDAQ’s all-time high is being propped up by a massive bubble in a few stocks, while what is happening down below is more like a foretaste of things to come. To wit-
The equal-weight S&P 500 is at the same level today as December 18th, 2017;
The NYSE Composite is at same level as in Sept. 15th, 2017;
The Russell 2000 small cap index is where it was on July 14th, 2017;
More crazy still, during the three years in which the index of America’s main street small and mid-cap stocks has gone nowhere, the total return (price plus coupon) on the 30-year UST has been a staggering 43%; and in the case of the zero-coupon 30-year UST, the return has been 56%.
Now that’s just nuts. Given the egregious fiscal breakdown and the near $80 trillion of public and private debt weighing down upon the nation’s faltering economy, owners of long-term bonds should be facing severe capital losses, not insanely massive capital gains on top of essentially nonexistent coupons.
Likewise, you have Tesla trading at 288X its pittance of free cash flow and valued more highly than Toyota for the same reason that bond prices are soaring irrationally: Namely, unhinged speculation on Wall Street that is being fueled by grotesque infusions of central bank liquidity.
That’s also why in the face of a quarter in which GDP is slated to plunge by upwards of 40%, the Dow booked its best quarter in 33 years; the S&P 500 posted its best performance since 1998; and the NASDAQ had its biggest increase since 1999 – jumping 39 percent in just three months.
Indeed, the chart below is truly grotesque by any other name. The 4-week moving average of continuing unemployment claims now stands at 19 million or at 6.1X its level at the start of 2013, when the NASDAQ composite stood at just 3,000.
Today it closed at 10,617 or 254% higher and because, why?
Netflix is worth $241 billion or 111X net income or an infinite multiple of free cash flow, of which it has generated negative $11 billion during the last 5 years?
Amazon is worth $1.600 trillion or 151X net income and 83X free cash flow?
Facebook is worth $700 billion or 33X net income and 30X free cash flow – after two years of low single digit growth and in the face of the biggest impending plunge in advertising revenue in modern times?
NVIDIA is worth $258 billion or 108X net income and 60X free cash flow?
Microsoft is worth $1.622 trillion or 35X net income – even though its earnings growth rate over the last 8 years has been just 6.5% per annum?
Apple is worth $1.664 trillion or 29X net income – even though its earnings have grown by just 4.5% per annum since 2012?
Google is worth $1.053 trillion – even though its earnings too have plateaued during the last two years and it is now facing a brutal decline in advertising spending?
In fact, the above chart actually understates the case because – surprise – the financial press doesn’t even report the correct figures for the number of US workers on the unemployment dole at the present time.
In addition to the 18.56 million of continuing claims reported yesterday under the standard state programs, there is another 14.36 million of so-called uncovered employees – gig workers, free lancers, temp agency contractors etc. – now getting the Federal pandemic unemployment assistance benefit (PUA) . That means at the time we are supposed to be sharply ascending the other side of the “V”, there are actually 32.92 million workers lounging at home and collecting unemployment benefits in lieu of a paycheck.
As Wolf Richter recently demonstrated, there are now nearly 2X more workers getting UI checks than the 17.75 million unemployed workers the BLS reported for June.
That’s right. We have repeatedly reminded that the BLS does not arrive at its jobs and unemployment numbers by counting; it generates them by modeling, and when the economy is at a big inflection point, to say nothing of the unprecedented turmoil of the moment, its models are not worth the digital ink they are printed on.
Stated differently, it do make a difference that 15.2 million workers no longer on the job are not accounted for in the BLS ballyhooed monthly jobs report.
In short, the whole shebang is on a razor’s edge and there is nothing much immediately ahead except opportunities for the whole system to go tilt.
For instance, the SBA payroll protection program (PPP), which has already shelled out an incredible $521 billion to nearly 5 million US businesses will expire next month, while the $600 per week Federal supplement to average state UI checks of $500 per week will expire at the end of July.
What this means is that the whole economy is floating on a massive air mattress of government subsidies and transfer payments which could suddenly evaporate if Washington becomes politically paralyzed; and, in any event, can’t be sustained much longer as a matter of sheer fiscal math.
When Rabbi Zeira finally realized his dream of reaching Eretz Yisrael, only a river separated him from his goal. Rather than wait for the next ferry to take him across, he decided to use a primitive bridge consisting of a log spanning the river, which he walked upon while holding on to an overhead rope to ensure that he wouldn’t fall.
A heathen observer of this rickety crossing cried out to him: “Impulsive people that you are, who put your mouths before your ears (when they said “we will do” before they said “we will hear” in accepting the Torah without knowing what it required of them), you are still acting impulsively. Why don’t you wait for the ferry in order to make a safer and more comfortable crossing.”
To this Rabbi Zeira sighed: “A land which Moshe and Aharon did not merit to enter – who knows if I wait any longer that I will have the privilege of entering it!”
(Kesuvos 112a)
Excerpted from “The Love of the Land – Selections from classical Torah sources which express the special relationship between the People of Israel and Eretz Yisrael“, by Rabbi Mendel Weinbach, Dean, Ohr Somayach Institution.
Early on in the pandemic it became clear that older individuals were at disproportionate risk of severe COVID-19 infection and death.
According to an analysis1 conducted by the Foundation for Research on Equal Opportunity, which included data reported by May 22, 2020, an average of 42% of all COVID-19 deaths in the U.S. had occurred in nursing homes, assisted living and other long-term care facilities. This is beyond extraordinary, considering this group accounts for just 0.62% of the population.
Avik Roy, president of the Foundation for Research on Equal Opportunity, wrote an article2 about their findings in Forbes, pointing out that “42% could be an undercount,” since “states like New York exclude from their nursing home death tallies those who die in a hospital, even if they were originally infected in a long-term care facility.” Roy also testified before Congress June 17, 2020, about racial disparities in COVID-19 and the health care system.3
Why Do Some States Have Exaggerated Nursing Home Death Rates?
Disturbingly, some states have nursing home mortality rates that are significantly higher than the national average of 42%. Minnesota4 tops the list in this regard, with 81.4% of all COVID-19 deaths having occurred in nursing homes and assisted living facilities. Ohio comes in second, with a rate of 70%.
As reported by Roy:5
“Another way to cut the data is to look at nursing home and assisted living facility deaths as a share of the population that lives in those facilities. On that basis, three states stand out in the negative direction: New Jersey, Massachusetts, and Connecticut.
In Massachusetts and Connecticut, COVID deaths per 10,000 nursing home and assisted living facility residents were 703 and 827, respectively. In New Jersey, nearly 10 percent of all long-term care facility residents — 954 in 10,000 — have died from the novel coronavirus.”
Thousands Have Died Unnecessarily
By and large, nursing homes are ill equipped to care for COVID-19 infected patients.6 They’re set up to care for elderly patients, whether they are generally healthy or have chronic health problems, but they’re not typically equipped to quarantine and care for people with highly infectious disease.
It’s logical to assume that comingling infected patients with noninfected ones in a nursing home would result in exaggerated death rates, as the elderly are far more prone to die from any infection, including the common cold.
March 17, 2020, Stanford epidemiologist John Ioannidis wrote an op-ed in STAT news,7 stating that “even some so-called mild or common-cold-type coronaviruses have been known for decades [to] have case fatality rates as high as 8% when they infect people in nursing homes.”
In other words, we should not be surprised that COVID-19 disproportionally affects older people. Most elderly are frail and have underlying health problems that make them more prone to death from any infection whatsoever. Since this is common knowledge, why did some states decide to violate federal guidelines and send COVID-19 patients back into nursing homes?
New York Governor in the Hot Seat
Democratic governor of New York, Andrew Cuomo, appears to have been among the most negligent in this regard. March 25, 2020, instructions from the New York Department of Health stated nursing homes were not allowed to deny admission or readmission of a COVID-19-positive patient.
Nursing homes were even “prohibited from requiring a hospitalized resident who is determined medically stable to be tested for COVID-19 prior to admission or readmission.” As reported by Roy:8
“As recently as April 23, Cuomo declared9 that nursing homes ‘don’t have a right to object’ to accepting elderly patients with active COVID infections. ‘That is the rule and that is the regulation and they have to comply with that.’
Only on May 10 — after the deaths of nearly 3,000 New York residents of nursing homes and assisted living facilities — did Cuomo stand down and partially rescind his order.”
Cuomo’s order seems particularly dubious considering the Navy hospital ship USNS Comfort was docked in New York City harbor. The ship, which had a 1,000-bed capacity, was barely used.10 It departed NYC on April 30, having treated just 182 patients.11
A temporary hospital facility at the Javits Convention Center was also erected to deal with predicted hospital overflow. It had a capacity of 2,500, and closed May 1, 2020, having treated just over 1,000 patients.12 With all that available surplus space equipped for infectious disease control, why were COVID-19 patients forced back into nursing homes where they would pose a clear infection risk to other high-risk patients?
Several Governors Violated Federal Guidelines
June 22, 2020, Centers for Medicare and Medicaid Services administrator Seema Verma condemned the actions of Cuomo and “other Democrat governors” — including Pennsylvania Gov. Tom Wolf, New Jersey Gov. Phil Murphy, Michigan Gov. Gretchen Whitmer and California Gov. Gavin Newsom — who contradicted federal guidelines for nursing homes in their own state guidance.
“Our guidance was absolutely crystal clear,” Verma said in an exclusive interview with Breitbart reporter Matthew Boyle, adding:13
“Any insinuation to the contrary is woefully mistaken at best and dishonest at worst. We put out our guidance on March 13 … It says … ‘When should a nursing home accept a resident who is diagnosed with COVID-19? …
A nursing home can accept a resident diagnosed with COVID-19 and still under transmission-based precautions,’ which means if this person is infectious you have to take precautions.
It says ‘as long as the facility can follow CDC guidance for transmission-based precautions.’ It says: ‘If a nursing home cannot, it must wait until these precautions are discontinued,’ meaning if you are not able to care for this patient — somebody is still positive and you’re not equipped to care for the patient, then you shouldn’t accept the patient into your care.
That’s really important because longstanding discharge — when you’re discharging a patient from the hospital, longstanding guidelines require when you transfer them somewhere you transfer them to a place that can take care of their needs whether they’re going home or they’re going to a nursing home or some other facility …
I just don’t think we should ever put a nursing home in a situation or a patient where we force them to take a patient they are not prepared to care for. That not only jeopardizes the patient but it jeopardizes the health and safety of every single resident in that nursing home.”
Stark Differences Between Nursing Homes
While Cuomo has tried to deflect criticism for his devastating nursing home directive, the facts seem to speak for themselves. ProPublica published an investigation14 June 16, 2020, comparing a New York nursing home that followed Cuomo’s order with one that refused, opting to follow the federal guidelines instead. The difference is stark.
According to ProPublica,15 by June 18, the Diamond Hill nursing home — which followed Cuomo’s directive — had lost 18 residents to COVID-19, thanks to lack of isolation and inadequate infection control. Half of the staff (about 50 people) and 58 patients were also sickened.
In comparison, Van Rensselaer Manor, a 320-bed nursing home located in the same county as Diamond Hill, which refused to follow the state’s directive and did not admit any patient suspected of having COVID-19, did not have a single COVID-19 death. A similar trend has been observed in other areas. As reported by ProPublica:16
“New York was the only state in the nation that barred testing of those being placed or returning to nursing homes. In the weeks that followed the March 25 order, COVID-19 tore through New York state’s nursing facilities, killing more than 6,000 people — about 6% of its more than 100,000 nursing home residents …
In Florida, where such transfers were barred, just 1.6% of 73,000 nursing home residents died of the virus. California, after initially moving toward a policy like New York’s, quickly revised it. So far, it has lost 2% of its 103,000 nursing home residents.”
Florida Republican Gov. Ron DeSantis actually took the opposite position with regard to nursing homes. Not only were hospitals not permitted to discharge COVID-19 patients into nursing homes, but all nursing home workers were also required to be screened for symptoms before entering facilities each day, and ensuring availability of personal protective equipment was prioritized.
In California, Los Angeles County nursing homes are such a hotspot, and local leaders describe the situation as a “pandemic within a pandemic.”17 There, the fact that many of the facilities are unusually large appears to be part of the problem.
They also have a higher percentage of people of color — another high-risk group — both working and residing in these facilities. Low pay, poor quality of care and inferior infection control add to the problem.
COVID-19 Primarily Spread in Health Care Settings
Overall, COVID-19 transmission appears to be rampant within our health care system in general, not just in nursing homes. As noted in “20% of COVID Patients Caught Disease at Hospital,” British data suggests 1 in 5 COVID-19 patients actually contracted the disease at the hospital, while being treated for something else.
SARS-CoV-2 is being transmitted not only between patients but also from health care workers to patients. When you add it all together, nursing homes and nosocomial infections (i.e., infections originating in or acquired from a hospital18), plus the spread from workers to family members, likely account for a vast majority of all COVID-19 deaths.
Without doubt, if nursing homes don’t start getting this right, they eventually won’t have enough patients to stay in business. Unfortunately, rather than tackle the problem head-on and implement sensible safety measures across the board, the nursing home industry is instead seeking immunity from COVID-19 related lawsuits. I discussed this in “COVID-19 and Nursing Homes: The No. 1 Place Not to Be.” According to NBC News:19
“So far at least six states have provided explicit immunity from coronavirus lawsuits for nursing homes, and six more have granted some form of immunity to health care providers, which legal experts say could likely be interpreted to include nursing homes …
Of the states that have addressed nursing home liability as a response to the outbreak, two — Massachusetts and New York — have passed laws that explicitly immunize the facilities. Governors in Connecticut, Georgia, Michigan and New Jersey have issued executive orders that immunize facilities.”
In other words, New York not only issued rules requiring COVID-19 infected patients to be admitted into nursing homes, and barred them from testing, it also granted nursing homes immunity against lawsuits.
Talk about triple injury. Clearly, New York nursing home patients have gotten ill and died due to willfully negligent directives. On top of that, families have been deprived of due process and any legal recourse for these beyond-reprehensible criminal actions.
Congressional Members Demand Answers
While several states have failed to protect their most vulnerable, New York’s actions stand out as being particularly egregious and, so far, no sound justifications have been forthcoming.
June 15, 2020, House Minority Whip Steve Scalise, R-La., and four Republican members of the Select Subcommittee on the Coronavirus sent letters20 to the governors of New York, Michigan, California, New Jersey and Pennsylvania, demanding answers:21
“Why did they give those orders? Why did they go against the safety guidelines that were issued from CMS? And why won’t they give us all the disclosure of the patient information that they were giving and then all of a sudden when we started discovering this they clammed up and they’re not letting the public see what these numbers really are?” Scalise said.
Curiously, Select Subcommittee Democrats not only declined to join Republicans in the proposed nursing home oversight effort, they also refused Scalise’s call to “get to the bottom of what motivated these decisions” in New York, Michigan, California, New Jersey and Pennsylvania, and they did not sign the letters to the governors of those states.22
In a press release by Scalise, Select Subcommittee member Jackie Walorski (R-Ind.) is quoted saying:23
“Just about the worst possible thing to do is knowingly introduce coronavirus to the most vulnerable populations, yet that’s exactly what several states did by mandating nursing homes accept infected patients.
These misguided policies deserve close scrutiny, and the leaders who put them in place have a lot of tough questions to answer. Now is not the time to look the other way while placing blame for this crisis on states that are taking a measured, responsible approach to reopening our economy and protecting our communities.”
