“Capitalism without bankruptcy is like Christianity without hell” Frank Borman

Bernie Sanders recently ended his campaign and endorsed former vice-president Joe Biden. Sanders’ chief economic advisor was Stephanie Kelton, who is the leading supporter of modern monetary theory (MMT). If you thought that the end of his campaign would be the end of socialism and MMT for a while, you were wrong indeed.

It turns out that Congress, the Trump administration and federal reserve chairman Jay Powell have fully embraced all of the ideas of socialism and MMT and are hard at work putting them into practice on a daily basis. The present economic downturn (only time will tell whether it is a recession or depression) was caused by global governments’ reaction to the pandemic. In response, the federal government has approved 2.5 trillion (another .5 trillion this week with more to come) and the Federal Reserve has “printed” another 2.5 trillion.

Despite assurances that most of this stimulus would go to main street, this has been proven to be another big lie. The Paycheck Protection Program (PPP) loans which were directed to helping small businesses stay float and retain their employees was gobbled up by public companies such as Ruth Chris and hotel chain Ashford, Inc. Meanwhile most small business, the intended beneficiaries of the program, received nothing. I read one stat that only 7% of restaurants received PPP loans. Since Ruth Chris and Shake Shack both received large PPP loans, I would bet that the actual percentage of small business restaurants is a decimal % of the total. The Department of Treasury has requested that the public companies that received the loans return them. Fat chance of that.

The airlines also received $30 billion in bailouts. This is the same industry that has used most of its profits to buy back its own stock in recent years. What is a buyback? Instead of investing profits in its business or returning it to shareholders in the form of dividends, the company instead buys back shares of its stock. Since earnings per share (EPS) is the measuring stick for most companies, reducing the denominator results in higher earnings, and bonuses for executives, without actually increasing business. It is a prime tool of financial engineering. If those airlines had maintained reserves, then they would have not needed bailouts.

While Congress was dishing out cash to all of the crony capitalists, the Federal Reserve was busy bailing out hedge funds. They began buying high yield “junk” bonds that suddenly became no longer viable due to the lockdown of the U.S. economy. In the good old days back when America was a capitalist country, if a company defaulted on a bond then the bondholder would lose his money. This is still the case for most of us. However, if you run a hedge fund, the Fed has your back.

At least the stimulus did cut checks to most Americans and it boosted unemployment payments. Due to the lockdown over 25 million Americans are now unemployed. The livelihoods of countless families have been severely impacted and many small business will never re-open. Recent studies that tested a sample of people in Miami, Fl and Stockholm, Sweden have shown that a large portion of the population (from 2% to 30%) have had the virus with no or few symptoms. This results in a fatality percentage a lot closer to like .01%. The studies which prompted the lockdowns have proven to be demonstrably false. One hopes that in the future, the proponents of the lockdowns are held to account for the economic destruction they caused. One also hopes in the words of the old Who song, “we don’t get fooled again”.