The Coronavirus, Fear, and Elitist Driven Market Insanity
Fear
is contagious: Fear is more contagious than any virus could ever be,
and the media has really fed the fear factor when it comes to the
coronavirus.
I am by no means playing down the deadly Covid-19
coronavirus. It is a killer. Depending on the reporting nation, it
appears that on average 3.4 percent of every 100 who catch the
coronavirus die. Those are not good odds.
Adding to the
problem, the Center for Disease Control allowed the virus to spread in
the United States out of an act of pure stupidity. The CDC refused to
allow testing of those with coronavirus symptoms unless they had visited
certain areas of China. And what about those who were exposed at
airports, restaurants and stores? People died of the coronavirus in the
United States before the CDC diagnosed a single case.
Because
most of those infected are asymptomatic the scope of the spread of
Covid-19 could only have been accurately measured by random testing. But
months after the first actual warning from China there were not even
enough test kits produced in the United States to test those with
symptoms. Random testing still is impossible. Even citizens returning
from hotspots in the first half of March were not tested at airports.
The headlines about seven dead in Seattle the first week of March
emptied out stores and brought commerce to a standstill in that city.
Shops and restaurants emptied out. With no guidance from federal, state
of local officials the panic buying spread throughout the United States
endangering the lives of millions of people as they coughed, sneezed and
fought each other over toilet paper in Costco stores nationwide.
When the CDC began to test those with symptoms who had not been to
China, the numbers exploded. As President Trump pointed out in his
announcement most of those coronavirus cases came from Europe. But the
CDC did not test anyone coming from Europe with the symptoms of the
coronavirus despite the headline news of the virus outbreak there. Why?
Elitism: The problem at every level of the federal, state and local
governments is elitism. All the bureaucrats think they are far smarter
and superior to those they serve, and as a result they come to very
intellectually stupid conclusions. Romans 1:22 describes the government,
business and academic elites well: “Professing to be wise, they became
fools.” (KJV)
Stock market reactions were bizarre even for that
fantasy world. The DOW was down over 1,000 one day, back up over a
1,000 the next, and then on Monday, March 16th down 12 percent, the
worst day since 1987. The White House and the Federal Reserve announced
the coronavirus would be fought with interest rate cuts.
Interest rates went to zero and the Federal Reserve pumped in $1.5
trillion before March 16th and then another $700 billion the day after.
WHAT? Using interest rate cuts and QE (Quantitative Easing) from the
Fed to fight a killer virus? NO … an interest rate hike to save the
stock market from the coronavirus fear factor. The Federal Reserve also
doubled down on overnight loans to help banks cover cash shortfall. The
markets crashed anyway.
The bank liquidity problem predated the
coronavirus. The bank bailout has been going on since last September.
The Federal Reserve printed half a trillion dollars to save banks over
the last six months. Does that make sense? Most of that money went to
cover loans for more stock buybacks and operations of big corporations.
The market plunge now requires even more Federal Reserve money printing
to cover losses.
The Fed money could not bring the Markets back
up because corporations had stopped “buybacks.” It was the buyback of
their own stocks by corporations that drove the market up over the last
decade or so, not value. Corporations like Exxon – all the big ones –
bought back hundreds of billions a dollars a year of their own stock to
drive up the share price for investors, and I might add, to increase the
bonuses by millions of dollars a year of the CEO’s of those companies.
The collective corporations in the S&P bought back more than 100
percent of their total free cash flow in 2019 and for many years before
that. Some companies, even in the DOW, paid out more to buy back stock
than they made in profit. They borrowed money to buy back stock and
drive up the markets.
Total buybacks in 2018 were $806 billion and
in 2019 an estimated $710 billion. All down the tubes now, lost in a few
days of panic selling. Not enough left of it to buy a coffee at 7-11.
Remember Boeing Aircraft and the 737 Max problem of two crashes that
grounded the planes worldwide? Over a period of six years (2013-2019)
Boeing paid out $17 billion in dividends and bought back $43 billion of
its own stock to drive up the stock price. That $60 billion came to 140
percent of profit for those years.
The CEO of Boeing received
tens of millions of dollars for raising Boeing stock value! When he was
finally forced out because of the 737 Max crashes he was given $18
million to leave as a reward for cutting production corners and
artificially driving up the cost of the stock.
Corporations, like Netflix, that have never made a profit had shares trading at hundreds of dollars.
The markets are so important to the elites that President Trump along
with the House Democrats and Republican Senate will do anything to get
people buying and cash flowing so the big corporations can restart the
buybacks they had to stop because of Covid-19 loss of business.
United Airlines used over 80 percent of its free cash flow in 2019 to
buy back stock and now has gone begging for money from President Trump
and the Congress to continue operations.
The elites who run the
businesses and the bureaucracies are worried about their status and
will do anything to keep the markets flying high. Their wealth is based
on a fantasy bubble that something like the coronavirus could pop. The
elites were so fearful they pretended there was no problem until the
problem was too big to hide. Now the public must suffer.
Some
final numbers: As of March 17th, the Fed has tossed $2.2 trillion into
the whirlpool sewer of the American stock markets. The money could have
gone to rebuild the entire rail network in the United States or to
relieve the roads of congestion. The money could have been used to
repair and replace the thousands of bridges in the United States that
are deficient.
OR … That $2.2 trillion could have been used to
increase the number of hospitals beds per 1,000 persons in the United
States up to Chinese or Russian numbers. Yes, the United States has just
2.5 or so hospital beds per 1,000 population in the United States, less
than even Turkey. The United States ranks 32nd and for the Covid-19
pandemic the tents are starting to go up.
“Greatest nation in
the world.” Agreed. We have an unequaled military that can go anywhere
and do anything. It should be able to -- the government prints nearly a
trillion dollars a year to pay for it. “Greatest nation in the world”
starts to sound flat when the roads, bridges, rail system and patched
together hospital systems are examined under strain.
The
Elites, the top 10 percent that own or control 80 percent of the wealth
of the nation, have failed us. That includes not just the billionaires,
but the Donald Trumps, Joe Bidens, Nancy Pelosis, Mitch McConnells along
with the bankers, brokers, CEO’s and academic leaders who have produced
so many college graduates who now work at convenience stores.
They built the system to do what it does … Create false value in stocks
because capital gain is taxed at a far lower rate than dividend income.
The tax system was designed to do what the CEO’s did to raise the value
of their stock at the expense of quality, safety and jobs.
The
political, financial and educational systems have been broken by blood
sucking elites and the time for true populism is now. The nation belongs
to the people, not to the elites, and now is the time for the people to
take back their nation.
Libertarian populism, the fundamentals
as taught by Frederick Hayek in Constitution of Liberty must finally be
turned to for the true freedom the people want and deserve.
William
J Murray is the president of the Washington, DC based Religious Freedom
Coalition and author of several books, his last, Utopian Road to Hell, details the historic pitfalls of collectivism.
Wednesday March 18, 2020
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