Corporate Bailouts Coming

With the stock market declining, one must remember that because Bill Clinton allowed banks and investment firms to merge, this means that as stocks decline banks will be at risk of failing. 

The Federal Reserve has already been bailing out failing banks again, quietly to most, since they began the Repo Market bailout in September of 2019. They have propped up corporate real estate firms by buying up mortgage backed securities (MBS) to the tune of billions of dollars each month for 2 years. The Federal Reserve balance sheet is currently at the highest level in history, far above 2009-2011. Beginning earlier this year, the Fed stopped pumping liquidity into the market, began increasing interest rates and has begun very slowly unrolling the balance sheet. 

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It is because the Fed has purchased MBS that real estate prices have reached the highest in the history of the US. It is because the Fed has kept interest rates low that the stock market has thrived while real people have suffered. This allowed corporations to use near zero interest loans to buy back their own stock, increasing the flow of wealth to the top. 80% of all stocks are owned by 10% of the population. At least 80% of that 80% are owned by 0.1% of the population. 

I will remind you that every single economic crash for 150 years of US history has been caused exclusively by stock speculation. The Great Depression, the Internet Bubble and the Great Recession are the major examples. It is US federal law that the ONLY concern for a corporation is the profit of the stockholders. 

One should also be aware that the Federal Reserve is not a government agency. It is a system of private, corporate, for-profit banks. You cannot own stock in the Federal Reserve. Only member banks can own stock in the Fed. Which means that banks can make risky loans. The Federal Reserve will bail them out, allowing them to make a profit on shady practices, while first charging low interest on loans to keep them afloat. Then, the same bank makes a profit from the interest which the Fed earns on the loan. These are the same banks that charge you 30% interest on your credit card, structure student loans so that it is nearly impossible to ever pay them off, that will evict millions from their homes and then auction the homes off to corporate investors at pennies on the dollar. While charging any balance to the previous residents in addition to fees. An eviction is profitable to banks. These are the same banks that fund high interest, short term loans to the same previous residents after having an eviction on their record. Note that if you are wealthy enough, you can own stock in the member banks which benefit from this arrangement. If you are truly wealthy or influential enough, you can be on the board of those corporate banks. 

If the government forgives student loan debt, it is true that borrowers benefit. That’s why it’s not really happening. Yet even if the loans are forgiven, the federal government will issue more debt and then pay the banks. Yes, the banks get paid and the increased national debt will have to be paid. Who is likely to buy up most of the debt? The Federal Reserve. Then that debt incurs interest. As the core interest rate rises, the interest on the national debt rises as well. The higher the debt, the higher the amount of interest collected in absolute numbers. Where does the Federal Reserve get the money to buy the debt? They create it out of thin air. It cannot be paid back with thin air.

The current US federal debt to GDP ratio is at 124.57%. The total US debt to GDP ratio is at 137.82%. We owe more than we earn as a nation. 

While you watch the stock market decline, understand that the wealthy are not losing money. In fact, they often gain money. Those who bought stock shares are selling them, which is causing the decline. They sell when profits generated no longer offer them a “high enough” dividend. They bought these stocks at low prices. They have automatic sell orders in place, so if a stock drops below a certain price, they sell all of the stock, still making a profit over their initial investment. In cases of corporate executives, often most of their compensation comes by way of stock packages. They can sell a certain amount of their stock while with the company each year. Or they can resign and then sell all of their stock before the next earnings report is released. So they profit from money they did not invest. If the stock crashes completely, they have lost nothing because they paid nothing. If the corporation goes bankrupt, they will be paid a massive bonus just before the bankruptcy or even as part of the bankruptcy. While if you owned stock in that company, you paid your own actual money in and you will lose everything. 

Corporations cause inflation. Sales decline, so they reduce wages, eliminate benefits and increase prices all to maintain stock dividends for the wealthiest. 

Corporations are already announcing mass layoffs to come very soon. Many are already laying off, including major national and global banks and investment firms. There is a Wells Fargo branch down the street from my house which has been up for sale for months. No buyers. 

There is another aspect of this to take into account. As interest rates are increased, this is not just a domestic issue. This increases the interest rates charged to poorer countries, often forcing them into default. The result is that they must then enter into austerity measures. Austerity measures include stopping pension payments to their elderly and disabled, often freezing wages for government workers for wages already earned. They include these countries selling off nationalized assets to capitalist investors, which can include ports, railroads, utilities, etc. They must privatize services such as healthcare, if they have universal healthcare. The human result is crushing poverty, violent riots, crime, hunger, even starvation, lack of medical care, mass homelessness and hyperinflation. Who is likely to be the private interests that buy up these assets and social programs? The exact same western investors that are causing inflation and laying off US workers.

As all of this is happening, what you can count on is that the US government will again be eagerly, rabidly seeking to bail out “too big to fail” banks and corporations, which are all much larger and more concentrated today than in 2008. The government will issue debt which will be bought by the Federal Reserve with money created from thin air. The money will then be handed to the very people who created this problem and who will profit from that debt. 

It makes absolutely no difference which of the two major parties is in the majority, the results will be the same. 

What do we do about this? Unfortunately, all of this is going to take place before the 2024 election. How would I handle these conditions? I actually have no problem with the idea of bailing out banks, as a general rule. That’s something which has to be done. I also have no problem bailing out corporations which provide essential services or that employ thousands of workers. 

However, there is a major caveat to all of this. That caveat is that, if the federal government must bail out a bank or corporation, that bank or corporation will be nationalized and restructured for long term stability, not short term profit. Banks not in default which issued loans to failed entities would be audited to learn if the loans had been made on risky premises. If that were found to be the case, they would be heavily fined and have severe oversight on their business practices for at least ten years. Executives of these corporations would also be criminally investigated. Many would likely be imprisoned. Investors, especially board members, would also be criminally investigated and held to account. There would be no forgiveness. There would be no bonuses as in 2009-2011. 

Personally, I find the best thing this country could do would be to nationalize the Federal Reserve. No private entity should be in control of the money supply or collect interest from the national debt. The Federal Reserve currently has virtually no oversight and no accountability, except to shareholders who profit from driving this country and others further into debt, bringing suffering to all who are not at the top of this system. Auditing the Fed is not enough. After such an audit, what would happen? Finger wagging, maybe a change of faces and that would be all. 

If we truly want a more stable, prosperous and healthy economy and society, this means we must take a holistic approach to reform. We cannot continue trying to make minor adjustments to a system which continually and repeatedly fails us and must be bailed out by the people, leaving debt at the bottom and insane wealth at the top. There is no justification for continuing this pattern, this system. We must enact drastic changes to return power and wealth to the people of this country. None of this will happen overnight, nor will it happen without major social involvement. 

Those who are not at the top of this system who still believe in the current system are going to have to feel a lot more pain to be convinced. That pain is definitely coming and will arrive well before 2024. Only then will they become aware of the true nature of this system. As they do become aware, we must be willing to educate them, accept them. They will go through periods of emotional denial. In fact, they will go through all the stages of grief, the same as with any major loss. We cannot treat them with resentment. They have been deceived, probably their entire lives. Awakening is a painful process and we must help them along. Only in that way can we forge them into true allies as we watch our numbers grow. 

Make no mistake. What is happening at this time is a global cathartic shift. This is going to be a highly spiritual time for many. We will have only two choices. Either devolve into self-centric barbarism which will take decades to recover from and which will make our situation far worse in the process. That is, if we ever recover. Or we can join together as a society, meaning a global society and work toward something much better, more aware, more cohesive, more humane. What we learn in this time can never be forgotten. We are all connected. That is a factual statement, not some rainbows and unicorns concept. We can either rise together or we can fall together. There is no other choice. 

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