THE TUG OF WAR BETWEEN THE VIRUS AND FISCAL STIMULI.
April 5, 2020 1 Comment
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This WordPress.com site is dedicated to independent working class politics. Contact me at briangreen@theplanningmotive.com
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I was expecting horrid jobless claims of 1M two weeks and maybe 1M or 2M last week but was stunned by the magnitudes. My friend was shaken on Friday on a call to a bank they have been doing business with for a long time. He was told that banks are inundated by companies inquiring about availability of financing. His company was politely told not to expect the bank to be responsive. It had always been the other around. he had never experienced such thing. That same bank had been pushing loans in the past. Companies are finally realizing that this is not going to be over any time soon that this is going to be long drawn out process. Capital reaction is to shift into survival mode preserving cash to ride it out. To that end capitals will be laying off large number of workers in the immediate future. You are correct that this deluge in unemployment is only beginning.
My take on inflation for the short run is this. Much of the bailout money will not end up in the hands of the general population. Bulk of it again will end up bailing out the rich to keep “asset” prices from imploding. MMT for the capitalist class. The spike in food prices is due to panic hoarding but going forward we may see dampened demand partly due to consumption of the hoarded foods and partly due to unemployment, etc. Oil and the so called commodity prices have fallen sharply that could result in short term deflation or be counter-inflationary. I continue to think shorter term deflationary but longer term inflationary.
Both China and South Korea, the paragons of containment, are bracing for the second wave. Will there be another lockdown? The so called “normal” train has left the station awaiting a new “normal” train to arrive. You maybe right that in 4-6 weeks governments will have to abandon lockdowns but there are signs that it will be more complicated. It’ll have to be in gradual phasing.
No V-shape recovery. Your forecast is neither V or L. Michael Roberts forecast is an L with the second leg gradually rising whereas in your forecast that leg tapers off.
As usual, informative and full of insights. Thank you Brian.