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- [00:10]
A
Welcome, friends, to another edition of Economic Update, a weekly program devoted to the economic dimensions of our lives. Incomes, debts, jobs, our own, our children's coming down the pike. And I'm your host, Richard Wolff. I want to begin today with sharing an article that really got my attention. On 29 July, Forbes magazine carried a story by one of their senior writers, Laura Begley Bloom by name, that I found astonishing. Forbes magazine, in case you're not familiar, is a magazine that's been a dominant player in business circles in the United States for over a century. It calls itself, quote unquote, a capitalist tool. It loves the system. It's a booster of capitalism. It is a place where you mostly see stories that think capitalism is about as good as it gets. So put that in your mind when I tell you about this story. It comes from work done by Asher and Lyric Ferguson, a husband and wife couple. Their work is available@asherferguson.com with two S's, and I recommend you go there to look at the basics of this story. But they keep they become famous, this couple, for rating countries according to a variety of statistics to say what's good or bad about them. And they recently reported on a study they did took some time to determine what is the best country to raise a family in right now in the world. And since they have limited resources and they wanted to use countries that keep the best statistics, they focused on the 35 countries that are members of the OECD, a famous grouping of advanced developed countries that many, many economists from all political perspectives use all the time. And they keep very good statistics. So what were the rankings that Forbes magazine thought were arresting and that I do, too, out of the 35 countries that consist of all of those, you would imagine the United States, in terms of raising a family, ranked number 34. The only country out of the 35 worse for raising a family was Mexico. And they're mostly because of the crime that is such a problem for them. The United States got an F for failure because they assigned grades in a way that I think you will find interesting. They measure safety, diet, schooling, all the things that you would consider if you were deciding where to raise a family. And the whole world was what you looked at. That the United States ranks 34 out of 35 tells you something about a reality so important and so contradictory to politicians celebrating how great we are and how much greater we're becoming that even Forbes magazine, a booster for US capitalism, wants us to see it and deal with it. And so do I. And I Think you would be well advised to take a look. July 29, Forbes magazine. Available on the Internet as well as in its normal hard copy. Okay, let me turn then to the updates for today. I want to begin by talking with you about restaurants that have closed. They have been one of the great victims of all of that has happened from the pandemic and from the economic crash. I want to give you an idea just of a few of the chains that have either declared Chapter 11 bankruptcy or have shut down. Chuck E. Cheese, Le Pain, Cotidien, Vapiano, Bravo and Brio. The NPC Corporation, which is one of the largest franchisor of thousands of Pizza Hut and Wendy's restaurants across the United States. California Pizza Kitchen, where I learned an interesting statistic that this Pizza Place is 80% of its business was dining in. Which means they cannot survive, which is why they've declared bankruptcy from takeout. Even if takeout expands, they're not going to survive losing 80% of their business. Dunkin Donuts has announced it's closing 800 stores in the United States and another 350 abroad. McDonald's is closing all 200 stores and that are mostly in Walmarts across the country. I mean, this is catastrophe. And it affects restaurant workers who are among the lowest paid in our country. But the contagion from this is even worse as these restaurants come back over the next year or two. If they do, many will not. They will be pressing their workers to work longer hours at lower pay in order to survive and make up for some of the losses they have already suffered. Benefit cuts, wage cuts, all of it. And this is going to cause not just pain for the workers affected, but the landlords in the buildings where these restaurants are located. They're not going to get their rent and they're sure not going to get the rents they used to get. And the neighborhood businesses that counted on restaurant visitors for, for part of their. All of them are dealing with the fallout this could have and should have been prepared for. Plans should have been in place to deal with either the pandemic causing this or the economic crash, let alone both together. But they weren't. And so these industries are suffering disproportionately. And as I'll show you later in the program, even as these folks suffer the most through absolutely no fault of their own, there are other players in today's economy that are doing really well. And nothing in this capitalist system works out to have a community in which those who are doing well share with those who are suffering. Those doing well are doing well through no fault of their own, just like those who aren't. Then there is the coming tsunami. Not my word of evictions. Here's the Many people have been unable to pay their rent or their mortgage payments for the last several months. April, May, June, July. And they probably won't pay in August either. And those are accumulating as debts. Now the courts have been closed and a number of governors and others have banned eviction proceedings in the courts. But those moratoria are drying up and the evictions are coming. Is there a plan in effect in the nation that deals with this problem? No. Is there a program to help people through it? No. No. That is a catastrophe about America even before the pandemic and the crash hit. And to underscore it, I'm going to compare us with France. Not because Europe is wonderful and the United States isn't, and not because Europe doesn't have many problems. It does. But here is an example of where we can learn something and where Americans need to understand where they are right relative to others. For decades in France, the following law has been on the books. No such law exists in the United States. Here you go. Ready? You cannot evict a person Ready ever between November 1st and the end of March. And the reason in the law is clear. It's because it's cold outside. And so it has been illegal for anyone to be evicted during the cold months of the year in France. End of story. Who fought for that law in France? The Socialists did, and they got it. And nobody has dared touch it since then. There's the recent action of the Socialist mayor of Paris, the capital of France. Her name is Anne Hidalgo and she's quite famous. She announced there would be no evictions this year until October 31st. How cute. That's the day before the normal law kicks in on November 1st. In effect, the the French will allow no evictions to even start until the end of March 2021. Now that's a way to deal with the problem of eviction. Nothing remotely like that exists in the United States. Then I did another comparison. France last year, 2019, had 16,000 evictions. That actually happened. The United States, over the same period last year, ready. Had 1.5 million evictions. I did the arithmetic. The rate of eviction per person in this country is 23 times greater than the rate of evictions in France per person. Think about it. I do want to take my hat off to the governor of Oregon who has acted to prevent any Evictions also until March of 2021. And there may be others, but of course it's haphazard. It depends on the politics of the governor and the legislature in each state. It should be a national program. It isn't, and that's a scandal. As I promised you, there are people doing real well and for them I wanted you to see, things are really nice. So I discovered that the Bugatti car company, very famous for the super elegant cars it has always produced, makes available now something called. I never heard of this before, I admit. The Bugatti Baby, a small little car that doesn't go very fast. Designed according to the Bugatti company for teenagers. It comes in three varieties that go slightly different speeds. And I just want to let you know they range from $35,000 for the teenage buggy at the bottom, then a $50,000 version and then a $68,000 version for the Bugatti Baby. For the teenager who has everything, it sells those cars because there are people doing so well during this catastrophe that they're buying Bugattis for their teenagers. The last update I have time for is the one that almost makes me gag. It's about the Pfizer pharmaceutical company. About a month ago, Pfizer said to great publicity that they paid to get how they weren't concerned about profits. They were focused on a vaccine for the pandemic. Now they have a contract with the government, Mr. Trump's government, for $2 billion. And suddenly the CEO of Pfizer, Albert Buria, announces that it is, I quote now, radical and fanatic to suggest that a pharma company forego profits on the vaccine for COVID 19. We have to make profits. Who do you think is finding vaccines? It's us. Profit, companies. Profit is what you need to have. Gee, I thought to myself, profit is what led to us not being prepared for the COVID virus to arrive. Profit is what led people to fire 52 million people over the last six months. And profit is what making workers getting back to work have to suffer lower pay and lost benefits. You Must be kidding, Mr. Bouria. But of course he wasn't. Business. We've come to the end of the first part of today's show. Please remember to subscribe to us on our YouTube channel, follow us on Facebook, Twitter and Instagram. Our website, sorry, democracyatwork.info is where you can learn more about other democracy at work shows, our union Co op store and the two books we've published, Understanding Marxism and Understanding Socialism. Last and not least special thanks to our Patreon community whose invaluable support makes this show possible. Stay with us. We'll be right back with author and investigative journalist Nomi Prince. Welcome back, friends, to the second half of today's Economic update. And it is really with genuine great pleasure that I welcome back an old friend of mine that I've worked together with on and off for quite some years now, Nomi Prince. I want to introduce her to you and then get into the conversations. She has much to teach us. Nomi Prince is a former Wall street executive. She worked as a managing director at Goldman Sachs in New York and as a senior managing director at Bear Stearns in London. She also held post with Lehman Brothers, Long lamented and the Chase Manhattan bank, not yet lamented. She left Wall street to become an investigative journalist, an author, an international speaker and advisor on financial and economic matters. She has written six really good books that I recommend to you, the most recent of which is How Central Bankers Rigged the World. So first of all, Naomi, thank you very much for joining us.
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Thank you so much, Rick. It's a true pleasure.
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Good. All right. I want to jump right in. I want people to hear how you see these things. So let's start with the fact that the Federal Reserve has responded in pretty much the same way to the three crashes we've already had in this new the dot com crash of early 2000, subprime mortgage crash of 2008, and now the so called COVID 19 crisis in 2020. Each time they pumped in a lot of money, they lowered interest rates. The only difference is as the crashes got worse, the amount of money pumped in got correspondingly larger until it's now in the trillions. How do you react to them following the same policy each of these three times when at least arguably having had three crashes in 20 years so suggests that maybe it's not the best policy?
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B
Well, that's exactly right. And this particular go around the Fed has more quickly and with more, let's say exuberance created more money out of nothing to effectively bolster up the stock markets and just financial assets. So whereas last summer, before we knew about COVID August 2019 cast our minds back their book, their balance sheet, the amount of assets that they had, treasury bonds, mortgage bonds that banks couldn't get rid of, the wake of the 2008 crash was at about $3.7 trillion, a significant representative proportion of GDP at the end of the year, end of 2019, because the economy wasn't as great as we're Being told, as we were being told at the time, their book had grown to $4.1 trillion. Why? Because banks were having problems internally, and the Fed and the banks were saying everything was fine, even though they were growing their book to subsidize the banks. Come 2020, come the coronavirus pandemic, and in the space of less than a month, they managed to nearly double that $3.7 trillion of last August to over $7 trillion on their books. Money created to buy stuff from the market and keep it on their books in that period of time. Now, they did not cause the virus, okay? However, their response to your point has been the same on steroids as it has been before. And that response does not repair, rejuvenate, restructure, or particularly help the real economy relative to the stock market and other financial markets.
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A
Tell me, are we then facing a bubble? Do you sense that this flood of money, which is clearly going largely into financial assets, including the stock market, and boosting it up so that we get this bizarre contradiction that so many people write to me about. The collapsing economy on Main street, all around them, the 52 million people filing for unemployment compensation and a booming stock market that has basically recovered from the crash of March. Is this a bubble? Will it collapse? What is it we're seeing?
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B
It is a bubble, and it will collapse. And that we have already seen from the prior crises and sub crises of this century so far. And the reason for that is because the money that's being created itself is going so quickly into financial assets. And that's not just the stock market. The stock market is kind of the most like, apparent disconnect between the real economy, because we know that a lot of people won't get back into their jobs. A lot of people will still be losing their jobs. Foundational economies and small businesses have been ruptured to such an extreme extent that the amount of money that has been flowing into the stock market, even if it were to be recalibrated, doesn't have the time to help the real economy in the current structure, in the current system. So therefore, it continues to bubble up because all the actors, the banks, the hedge funds, the private equity funds, the wealthy, the people that dabble in the stock market even, are collectively pushing up that value. And that's why we see, for example, that the Nasdaq, the representative of the technology stocks, and there is some merit. They do help people do things from home. But on the flip side of that, there's a ton of money going into them and creating new records and that's why the Dow is up to almost where it was before the pandemic. That is a bubble. It does not represent the real economy. It doesn't even represent where the real economy is going to be in any sort of near future. And on top of that we have a bubble in debt. Debt was already high, public debt was already high. Corporate debt was already at record highs before the shear began. Now we have a situation where because of the Fed and because the private banks want to make their money in fees for creating deals with their corporate customers so at least somebody can make some money while some of them are closed, they are borrowing more debt. So as a result, in the first half of this year, the larger corporations in this country have already borrowed more because of the Fed's policies, because the Fed has said that they will be there to help them if they need it. Not just the government, the Fed. They have been able to blow up their debt by as much in these six months as the entire year last year, which was already a record. That is also a bubble. Bubbles with nothing beneath them at some point pop, and that's what we'll see. And it might pop because another wave of the coronavirus, the same wave, bigger, something else that we haven't seen yet, or the general sort of deluge of this debt coming out of the bubbles that it has been inserted into. And these are problems because we're not repairing, we're not viewing, we're not looking at long term strategies for the real economy, particularly in crisis.
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A
But even beyond that, is it possible? And I know I'm calling for your opinion, but you know this material, you study it. That's why your opinion is of interest to us. Is this a system so terrified about the crisis it's in that it simply will not look down the road. It has that view. If we don't get through this in the next X months, the future is irrelevant to us anyway because we're facing collapsed. Are we at a point in American capitalism where that's the mentality of even the people sitting at the top and spouting off the usual patriotic junk?
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B
I think we are. And I think the caveat to that is that they don't have to think as much. They're allowed to get lazy about plans, about pushing for financing, about pushing for stronger foundational economic plans because this extra help, the Fed, the Treasury Department with the Fed, Congress with the Treasury Department with the Fed, the companies that basically take inhale this cheap money and spout it out into their own share prices or into their debt or something like that. Down the line, they don't even have to think as much. So it's not even that they don't. Some don't. Some just look at the stock market as this be all, end all of representing whatever they need to care about. But some others just. It's almost like they don't need to care because they don't have to put in the effort. Because this backstop, because this sort of financial subsidy not only exists but has been proven time and time again to exist to the level, to the volume, to the amount that the market wants.
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A
All right, none of us has. You haven't. I haven't lived through whatever it means to speak of the end of an empire or the end of a system. But if I were asked to guess what kind of things one sees and experiences when a system is at its end, are we in that situation?
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B
We're in a situation where the system is desperately and continually trying to rejuvenate itself. Now, that might be a mark of any system, but the desperation element is something that happens when there is a shift in systems that could be relative to capitalism. But I think it's more almost with respect to sort of how the superpowers, how countries are aligned with respect to each other. And I think that we are definitely on a point right now where the United States, for example, keeps on talking about things that could have been or might happen or infrastructure plans. And this is both administrations, both parties that aren't really materializing. Whereas there are some nations and they are putting more money and more planning into sort of economic infrastructure. They might have other issues with sort of culture or people or freedoms. But there is this shift that's going on throughout the world, for example, even between the US And China or with India kind of peaking up in terms of how they look at planning, how they look at sort of using really from a government standpoint, the strengths of their populations as well with long term strategies that can help an economy, that can help at least move forward the technologies. And I say that from the standpoint of health, you know, fast trains, infrastructure technologies, as well as, as well as other types of social strategies that we're just not seeing in the United States in terms of really plowing in that kind of thought and that kind of capital. And I think that's where we're actually at a precipice right now of a shift.
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A
But then that would imply, if I'm hearing you correctly, that there's some sort of decline of capitalism in the west relative to its growth and development in the east, roughly speaking. And so that it isn't maybe the end of a system, but it's the exhaustion of one part of a system and the emergence of another. And if that's the case, what do you make of the symbolic actions of the Trump administration, whether it's closing the Chinese consulate in Houston or the Huawei persecution, or now the TikTok maneuver? How does that play into your framework here?
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B
It's that desperation, on the one hand, of the Trump administration trying to figure out ways to sort of create a larger enemy out of an external country, as opposed to paying attention to what's happening internally. And so what's happened with respect to the trade wars, with respect to Huawei, with respect to TikTok, is that the Trump administration has decided to focus on external enemies and creating more of an enemy of an external actually trading partner anyway, regardless of what they're saying and what they're doing and the tariffs and the trade wars and everything. And that actually destabilizes the United States because that's why we have, you know, farmers not necessarily able to sell the produce that they have right now. Of course, we also have a virus, and we have other issues on top of that. People who are constructing things in small companies throughout the country and say, you know, may need steel, but there's tariffs on it. I mean, all of this sort of way in which the administration has created a tariff war, a trade war, is actually detrimental to the United States. And so it's really about a voter preference and sort of the playing to the base of the Trump administration, then thinking economically, even if you stood back as the business person he is supposed to be, and take a look at how economically detrimental those policies, that instability that comes into play, that uncertainty for the smaller and middle type of businesses in this country and for the individuals who rely on a supply chain that is global of products, that really hurts the United States. And I think he's doing it because he'd rather hurt, or he'd rather pretend it doesn't hurt or whatever's going on than to actually think again, economically, strategically.
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A
Yeah, he wants to get reelected. And nothing else seems to enter the framework. We've come to the end of our time. Nomi, thank you very, very much. I commend all of our viewers and listeners to take a look at the work Nomi does. It's really unusual, an insider's perspective that is also critical. It's very special and very worthwhile. Thank you all for watching. I hope you found Nomi as interesting as I always do. And I look forward to speaking with you again next week.