Sad, but true
Whenever an economic crisis appears, governments are quick to respond. They will grandstand to make the most of the situation. It does not matter how the crisis began like in this case as a health issue. It will eventually effect the economy which is a politician's cue. There are economic packages all over the world.
Germany already had the playbook written. This virus just opened the pages. The UK along with Europe will shrug off criticism by throwing blame. The first deflection was on the US for stopping airline travel to and from Europe. In the US we will get the same old same old. The democrats blame the republicans and visa versa. The Chinese saved their economy by telling banks and other receivables that no bills will have to be paid for six months. You can do this with a state sponsored economy. The EU, UK, China, Australia and the US central banks all cut their interest rates. They are saying, "You need money. Here it is."
This is all they know and their actions never address real problems. Their actions will explode government debt and corporate debt. There will be other consequences like another serious crisis to our oil and gas industry. In 2019, according to Haynes and Boone, there were 208 oil and gas producers who accumulated over $122 billion in debt. Oil service firms racked up another $66 billion in debt. With falling prices the charts say that oil could touch $26 a barrel again. No one makes any money with that price. Layoffs and cut budgets are coming in a big way along with dividend cuts. President Trump announced that the government will buy oil to restock the national reserve. This won't be enough. The year ahead looks worse.
In addition, there was 42 energy bankruptcies in 2019 as well as 21 oil service bankruptcies. More are coming!
Specious ideas
I think the US leads in this category, although every nation uses a crisis to enrich the rich. What their governments announce is the spin. They seek to trick you like a magician with misdirection. Their solutions is really "corporate welfare."
The US is legislating a package of stimulus to counter the coronavirus. President Trump will preach that he is helping citizens with the payroll tax holiday. This will put more money into workers pockets. This is misleading and lying. Dear Reader, the payroll tax is social security. The employer must match the workers contribution. This action saves the company money. Yes, the worker will take home a bigger check, however that same worker will lose long-term. The worker has already adjusted his living to his income. Yeah, the next few weeks will give that person some relief, but the same worker will lose his earned income for the year under social security. When that worker retires, he will receive less in all the years of retirement due to calculations. Workers will lose the year 2020. The company gets a windfall that accountants will find a way for that money to be tax free. The wealthy get more. The payroll holiday is skewed to the employer not the employee.
The other big idea is to give direct cash, possibly $1,000 to every household. This is from the old playbook and it is used as an election bribe to win the populous over. President Trump is behind this 100%. Why not? The economic ramifications of the virus could cause him the election.
People will suffer, but they will manage. This policy will explode the national deficit. Politicians will always remind citizens that everyone is guilty over the debt. It gives them a good escape clause, as everybody is equally guilty. Well, here at Evolution, we know the real guilty party is the military under the Pentagon.
Anyway, who gets most, if not all that check money? The banks. Here is an idea that I like: A rent/mortgage free month. The government tells banks who always gets government help, to allow everyone a holiday for 30 days. This way there is no explosion of debt. Everyone gets a free pass which is truly charitable. Can I get an amen, brother?
In China the no bill paying will help all, but the help is skewed to the big exporters rather than small stores doing business in market places. How can you compare the saving of a few thousands of dollars to millions and possibly billions in large exporters?
In the US the democrats will cite the paid leave. They will seek to buy votes in November. The republicans will counter with the payroll tax holiday for the same reason, and another bonus. They promise to return to a strong economy when the virus passes with warm weather. They both lie!
There will be hidden bonuses for employers for paid leave. The economy as shown in my weekly articles is a pick and choose winners with more losers than winners. Our homelessness indicates the failure of our economy for all Americans.
Back to the blame game
In the worse example, this is making waves in social media in China. Speaking from his foreign ministry post, Zhao Lijian says the US Army started the coronavirus. It appears that 300 US military athletes were in Wuhan at the same time the virus started. I guess you can get away with this horrific lie when the first warning of the virus was by a local Wuhan doctor who was not only suppressed by the state communists, but died healing the sick due to the COVID-19 disease.
Year of the Rat...
Since we do most of our trading with China and for China doing business with the US has had the most positive effect on China, I feel that some cultural exchange is in the mix. Under the Chinese zodiac, this is the year of the rat. In America, a rat is associated with the worst in human actions, an animal that transmits disease and it is associated with poverty. Under the Chinese signs, it is considered prosperous. If we are to develop our relationship to the positive, then our cultural mixes are needed. So, under American thinking of what a rat resembles, Mr. Zhao Lijian is the leading contender for Rat of the Year!
Another Zhao in Fed's Clothing
In a flagrant bid to expand power during this crisis came from the Boston Governor and a voting member of the Federal Reserve. Eric Rosengren said, "We should allow the central bank to purchase a wider range of securities or assets." This is still another example why I say, "End the Fed!"
Another contender...
goes to the Norwegian Cruise Line who had their sales-people tell potential customers that there was no fear in cruising because the "warm climate:" kills the CORID-19 flu. The cruise line sails in the tropics. Funny, Singapore is a warm climate city and the virus hit the city-state extremely hard. Can't wait for the first lawsuit against the cruise line by a passenger getting sick on their ship.
