Living in a distorted world that is crashing around us. Image of the Chicago Bean, copyright 2020 by Passage Film, Inc.

Prelude to the storm

This is a brief tale of oncoming economic disaster wrapped in pandemic incompetence. A depression-disaster caused by Wall Street together with the President they bought. “This American Carnage” in Trump’s own words.

“We have two Governments in Washington: one run by the elected people—which is a minor part—and one run by the moneyed interests, which control everything.”

Studs Terkel, Hard Times: An Oral History of the Great Depression

History repeats her tale unconsciously, and goes off into a mystic rhyme … A. N. Mouravieff

Trump ran on populist pablum while falsely attacking Hillary Clinton for taking tons of Wall Street Cash; as usual with Trump, he was projecting. Wall Streeters Anthony Scaramucci, Carl Icahn and Tom Barrack all gave Trump big money. Plus Stephen Feinberg — he was the private equity captain who used Cerberus Capital Management to brand the AR-15 Bushmaster as a killing machine. (What kind of man names his company after the three-headed monster-dog guarding the gates of hell anyway?) And don’t forget Steven Mnuchin, Wilbur Ross & other top Wall Streeters who were also on the Trump train. A train running on tracks greased with millions from Robert Mercer.

The one fact that says it all — Trump promoted Gary Cohn from Goldman Sachs boss to head of his economic team. Wall Street owned Donald Trump. In exchange he gave them everything they wanted and the markets loved it. While it lasted …

The Roaring Teens

Remember December? When the Dow was booming and Wall Street analysts were screaming “bull run!” at the top of their lungs?

“Back up the truck and buy, buy, buy. Take risk off the table as a concern to be hedged. There is no risk. Bet on it.”

That was Chris Rupkey, chief economist at the Mitsubishi UFJ Financial Group, talking up the market just after Trump announced his Phase I “Trade Deal” with China. Fed Head Jay Powell was bullish too:

“Our forecast is, and our expectation very much is, one of continued moderate growth … The US economy is the star economy these days.”

The great Wall Street run continued into January, impeachment be damned, as President Trump declared victory in his trade wars with China, Canada and Mexico. It hit its high February 12th on the happy-talk news coming out of China about coronavirus:

The S&P 500 and the Nasdaq recorded new highs on Tuesday as investors cheered to Chinese health advisers’ remark that coronavirus outbreak may be peaking.

My, what a difference a month can make. Now economist Rupkey sings this tune:

“This looks bad and it is bad. The worst jobless claims in U.S. history means the economy has fallen into the abyss … the labor market could easily become depression-like very quickly where one out of four of your neighbors is no longer getting a paycheck. Stay tuned. The worst is yet to come.”

This American Carnage

“What went wrong?” is an important question. Because lots of people will try to re-write the narrative of this pandemic & economic crash — not the least being the President’s re-election campaign, which now wraps China and VP Joe Biden into one package and blames them for the virus that destroyed Trump’s economy — “the greatest economy in the HISTORY of America”.

I’m a believer in memory and using it to hold people to account, so let’s play the tape from Trump’s Inaugural Address:

January 20th 2017, will be remembered as the day the people became the rulers of this nation again. The forgotten men and women of our country will be forgotten no longer … Americans want great schools for their children, safe neighborhoods for their families, and good jobs for themselves. These are the just and reasonable demands of a righteous public. But for too many of our citizens, a different reality exists: Mothers and children trapped in poverty in our inner cities; rusted-out factories scattered like tombstones across the landscape of our nation; an education system, flush with cash, but which leaves our young and beautiful students deprived of knowledge; and the crime and gangs and drugs that have stolen too many lives and robbed our country of so much unrealized potential. This American carnage stops right here and stops right now ... So to all Americans, in every city near and far, small and large, from mountain to mountain, and from ocean to ocean, hear these words: You will never be ignored again … Together, We Will Make America Strong Again. We Will Make American Wealthy Again. We Will Make America Proud Again. We Will Make America Safe Again.

Trump didn’t utter the words “health insurance”, “doctors”, “nurses”, “hospitals” or “healthcare” during the entire speech. The very things we desperately need to “make America safe”. He also didn’t talk about wanting to keep us safe from the unexpected — say for instance pandemic disease. Something his administration-in-waiting had actually studied together with Obama’s team just seven days earlier. I encourage you to read this Politico account:

In a sober briefing, Trump’s incoming team learned that the disease was an emerging pandemic — a strain of novel influenza known as H9N2 — and that health systems were crashing in Asia, overwhelmed by the demand. “Health officials warn that this could become the worst influenza pandemic since 1918,” Trump’s aides were told. Soon, they heard cases were popping up in California and Texas. The briefing was intended to hammer home a new, terrifying reality facing the Trump administration, and the incoming president’s responsibility to protect Americans amid a crisis. But unlike the coronavirus pandemic currently ravaging the globe, this 2017 crisis didn’t really happen — it was among a handful of scenarios presented to Trump’s top aides as part of a legally required transition exercise with members of the outgoing administration of Barack Obama.

Coronavirus has triggered the very economic carnage that Trump falsely pretended had been visited upon the country by Obama. A carnage comparable only to the Great Depression. Obama left the country on a competent footing to handle this pandemic and minimize both its human and economic damage. President Obama’s preparations even concerned details as small as a potential shortage of N-95 masks, which the Obama administration knew would quickly run out in a pandemic. So they created a way to make them quickly in quantity:

In September 2018, the Trump administration received detailed plans for a new machine designed to churn out millions of protective respirator masks at high speed during a pandemic. The plans, submitted to the Department of Health and Human Services (HHS) by the medical manufacturer O&M Halyard, were the culmination of a venture unveiled almost three years earlier by the Obama administration. But HHS did not proceed with making the machine.

Obama left behind a pandemic response team at the National Security Council — The NSC directorate for global health and security and bio-defense. The Trump administration shut it down in 2018:

“I was mystified when the White House dissolved the office, leaving the country less prepared for pandemics like COVID-19,” Beth Cameron, the first director of the unit, wrote in an op-ed Friday in The Washington Post. She said the directorate was set up to be the “smoke alarm” and get ahead of emergencies and sound a warning at the earliest sign of fire — “all with the goal of avoiding a six-alarm fire.”

The saddest part? When he first came into office, Trump appointed an extremely competent Homeland Security Advisor, Tom Bossert, one of those present at that Obama briefing on the theoretical flu-pandemic. Someone who would have jumped on this thing and done what was necessary to contain it. Read Bossert’s March 9th editorial in the Washington Post and weep for what might have been:

The first phase of the coronavirus outbreak was a domestic challenge for China and a border containment one for the United States and others. Now we are in the second phase: community mitigation. Math and history must guide our next steps. The near-term objective should be to reduce the acute, exponential growth of the outbreak, in order to reduce suffering and the strain on our health-care system. That will require significant effort, but it can work ...

When he wrote this, Bossert no longer worked for Trump. He was fired when Trump hired John Bolton as his National Security Advisor in 2018. Bossert’s editorial was prescient, it came five days before San Francisco and the Bay Area shut down and eleven days before New York shut down. The California shutdown contained its outbreak. New York was too late. Had Bossert still been in the White House we might be looking at a different reality today. We certainly wouldn’t have nearly 400,000 infected in the U.S. and nearly 11.000 dead, which are the numbers as I write this. My own uncle is among the infected and soon-to-be dead; my anger is personal and not just abstract.

The Trump administration failure list is a long-read. Washington Post reporting details the government-wide dysfunction that enabled this pandemic to kill Americans by the tens of thousands. It’s brutal:

… the United States will likely go down as the country that was supposedly best prepared to fight a pandemic but ended up catastrophically overmatched by the novel coronavirus, sustaining heavier casualties than any other nation. It did not have to happen this way. Though not perfectly prepared, the United States had more expertise, resources, plans and epidemiological experience than dozens of countries that ultimately fared far better in fending off the virus. The failure has echoes of the period leading up to 9/11: Warnings were sounded, including at the highest levels of government, but the president was deaf to them until the enemy had already struck.

Lisa Monaco was Obama’s Homeland Security Advisor. Here she defines what it is to be prepared at the federal level:

“Oftentimes, the gauge is no mistakes, no criticism, just complete smooth sailing,” Monaco said. “That to me is not the definition of what it means to be prepared.” She argued that preparation means planning ahead of a crisis, and having structures and organizations that can move quickly and principles that guide decision-making. “I think it’s about trying as best to minimize the chaos, particularly at the beginning,” she said.

Her interview came in WaPo reporting where Dan Balz analyzed federal government failures in four past crisis — Hurricane Andrew in 1992, 911, Katrina in 2005 and the 2008 Financial Crisis. The crucial fact Balz ommitted? All four of those disastrous disaster-responses came on a Republican watch.

President Trump owns this American Carnage. Don’t ever let him forget it. Don’t forget either that Wall Street & the GOP put him where he is.

Wall Street set us up for a great big fall, just like 1929

Coronavirus triggered the crash, no doubt. And the damage it’s doing in shutting down the world economy is enormous. But the size of the Wall Street crash has another cause — enormous amounts of corporate debt. Things were headed for trouble, with or without coronavirus. I don’t care about the occasional up days for the Dow — like today’s 1000 point climb — these are just the dying jags that come with a nasty bear market. Ten million unemployed and rising, a real estate market riding a huge bubble and state governments about to go through budget slashing as tax collections vanish and expenses from coronavirus rise. (There’s a much longer list but that’s a different diary for another day).

Even before coronavirus, the world was sliding toward recession, thanks in part to Trump’s many trade wars. Frantic efforts last fall by the New York Fed to keep the Repo Market from collapsing revealed systemic problems that we still don’t understand. Repo is the overnight lending market that is a crucial part of world banking machinery.

The other big warning? Last year the yield curve on bonds inverted. A yield inversion has predicted every major recession for the last fifty years.

I researched our economy in-depth over the last half-year and wrote a film-themed economic essay about it called Dr. Strangelove Economics: or how I learned to stop worrying and love the crash. Follow the link to read it on Medium if you want a deep-dive into what happened to our economy over the last four decades. But I’ll warn up front, it’s a long read.

If you just want the Cliff Notes — here’s the gist.

Inequality has reached absurd levels, with Forbes listing 2,153 billionaires in 2019 that owned $8.7 trillion of the planet’s stuff — one-third of them living in the U.S. This while the bottom half of America owns nothing at all. The Federal Reserve noted in their most recent Report on the Economic Well-Being of U.S. Households that in 2018, 39% of the country didn’t have enough cash on hand to handle a $400 emergency and 24% went without medical care because they couldn’t afford it. In the middle of the Roaring Teens. When times were “good”.

I lay the blame for this extreme inequality — and its attendant economic instability — on economist Milton Friedman. He invented ”Shareholder Theory” which launched the neoliberal economics of Reagan and Thatcher. An economics subsequently adopted by the whole world. In Friedman’s universe, there was only one group that matters — corporate shareholders. And only one societal good worth pursuing — profit. It’s best summed by his famous quote:

There is one and only one social responsibility of business — to use its resources and engage in activities designed to increase its profits …

The consequence was that governments around the world gave financiers carte-blanche to plunder the wages of working people. Private equity has emerged as the biggest villain. Nearly nine million Americans work in private equity controlled companies — a total of 8000 American corporations, according to a 2017 McKinsey & Company study.

Unfortunately, private equity (often called PE) isn’t just rich people. It’s also ordinary folk in the form of union pension funds, state retirement funds, college endowments and the like. Every large pot of money invests in private equity because of its great returns, which are the result of a standard playbook — PE buys a company and fires some workers, caps the wages of those who are left and increases workloads. These and other “cost savings” mean huge returns for the PE firm. But the end result for the PE controlled company is often bankruptcy. That’s because private equity NEVER uses much of their own capital for their corporate raids. They borrow money and put the debt on the books of the newly-acquired company. If they need to up their ROI — return-on-investment — they borrow more money and put that debt on company books too. The cash from the loan is transferred to the PE firm as profit. If you want to understand the damage from an employee perspective, a worker’s coalition called United 4 Respect created this report: Pirate Equity: How Wall Street Firms are Pillaging American Retail.

As a result of debt generated by PE activity, along with other profligate practices (like borrowing money to buyback your own corporate stock), the debt of large US companies has reached $10 trillion — roughly one-half of GDP — and the total business debt-load is $15.7 trillion when you add small, medium and family companies. Corporate debt was an unsustainable 73% of GDP — before the crash.

“We have been always saying that we are sitting on top of an unexploded bomb, but we don’t know what is going to trigger it,” said Emre Tiftik, director of Research for Global Policy Initiatives at the Institute of International Finance, a Washington-based financial industry trade group. “Can the coronavirus be a trigger? We don’t know. Maybe.”

This Emre Tiftik quote came from the New York Times on March 11, 2020. The next day the Dow fell a record 2,352 points, the sixth-worst drop in history. Four days after that, the Dow lost another 2997 points — a 12.93% loss that topped the 1929 Black Monday record.

If it were just coronavirus things would be bad — but they wouldn’t be Great Depression bad.

President Trump inherited an economy with inequality and debt problems but steady growth. Instead of preparing for the lean times that were surely coming, Trump and the GOP decided to throw a Wall Street party, with trillions of dollars in corporate tax cutting, along with the slashing of regulations and oversight that encouraged even further reckless lending.

President Trump is the apotheosis of Milton Friedman’s shareholder theory. Given the scale of this disaster, let’s hope he’s also the end of it.

To repeat: The President owns this american carnage.

He was brought to you by the GOP & Wall Street.

Don’t ever forget it.