Uncle Sam’s Bonus for Adulting
As more states begin to reopen, Americans are gradually going back to their jobs. But with many polls suggesting apprehension over returning to work because of the Coronavirus or that people like to be given free money, the administration is concerned that too many people will choose to stay home. Many laid-off workers are now receiving more in unemployment assistance than they were making before the lockdown. The Republican leadership is now considering a variety of policy solutions to encourage folks to head back to the office.
Senator Rob Portman (R-OH) recently proposed a temporary $450-a-week bonus for unemployed workers returning to their jobs, in addition to their earnings. White House economic adviser Larry Kudlow confirmed in an interview with Fox News that President Donald Trump and his team are examining a back-to-work bonus.
“It may well be, it’s something we’re looking at very carefully,” he said. “Senator Portman has a good idea, and he understands incentives and disincentives.”
Although Congress is likely to reject another $600 per week in extra jobless benefits, Kudlow still believes the idea acts as a “disincentive.” Kudlow is correct: Why bother risking your health or losing out on another day of Netflix binge-watching when you could get a handsome payday from the state? No wonder there is a lot of consternation surrounding a universal basic income (UBI)!
Kudlow noted that the White House is assessing other policy tools, such as a payroll tax cut. This is a much better solution, but then there is another question: How could the U.S. government implement a tax cut when it is already spending trillions of dollars? A reduction in penalties on living should always be promoted, but it must be followed up with a spending cut.
Japanification of Bonds
The Japanese government recently unveiled another phase of its trillion-dollar stimulus spending to prevent the world’s third-largest economy from sliding deeper into a recession. Prime Minister Shinzo Abe plans to give everyone free money, as well as extending rent relief to companies and funding for vaccine development. He marketed his scheme to the parliament as the “world’s biggest stimulus” initiative, which was enough of a case for officials to overwhelmingly approve the plan.
So, how will the country pay for it? That’s easy: The Bank of Japan (BoJ). It has purchased so many government bonds during this financial crisis, and throughout the anemic period last year, that what is another few hundred billion at this point?
According to new central bank data as of March, the BoJ’s government bond holdings are about 90% the size of the entire economy. The BoJ’s domestic debt reserves have surged 3.4% from the same time a year ago to $4.5 trillion – and this figure is expected to swell in the coming months. But that is not all.
The size of its foreign currency assets has roughly quadrupled during the last fiscal year, which ended in March, as the BoJ expanded its dollar-funding operations. And that still is not all!
Its earnings report highlighted that BoJ profits from its exchange-traded funds (ETF) holdings slumped to their lowest levels since the fiscal year 2011. The institution forecasts that its ETF investments will face losses should the Nikkei stock average slides below 18,500 – the Nikkei is trading just under 22,000.
As Liberty Nation has reported, the BoJ is the top shareholder on the Nikkei, a move that artificially props up the index. The BoJ is not the only central bank to engage in this interventionist behavior. The Swiss National Bank (SNB) is a massive stakeholder in U.S. equities, adding 22% to its positions during the blood bath in March. The People’s Bank of China (PBoC) routinely bails out publicly traded firms. The Federal Reserve has purchased corporate debt through the ETF market. In recent years, central banks have transformed into money-printing hedge funds.
COVID-19’s Impoverishing the World
For the last 30 years, extreme poverty – those living on less than $1.90 per day – has continually fallen. It is an incredible trend that highlights free-market capitalism’s power to lift millions of people from the ashes of destitution. And yet, for whatever reason, leftists want to dismantle this very system. After a two-month trial of communism, progressives may be getting what they want.
According to Mark Lowcock, the United Nations under-secretary-general for humanitarian affairs and emergency relief coordinator, the percentage of the world’s population living in extreme poverty will increase. The UN had initially projected at the beginning of the year that around 130 million would be at risk of starvation. Thanks to the global lockdown, that number is expected to top 265 million.
Lowcock was blunt in his assessment of the dire situation: “There’s a huge covid impact which is economic, and that is drowning out the disease itself. … We could have mass hunger and multiple famines.” But if you dare get a haircut, go out for a bite to eat, or advocate for small business owners to make a living, you are accused of trying to kill grandma. Or worse, you are Literally Hitler ™!
Smart folks on Wall Street say that it could take several years for the U.S. economy to return to normal. If it could take the world’s biggest market that long to recover from a couple of months of being under house arrest and closing the economy, then imagine the length of time it could take everywhere else.
Everyone has been doing their part in limiting the spread of Coronavirus, but two things can be true at the same time: COVID-19 is serious, and the government failed everyone in a myriad of different ways.
Read more from Andrew Moran.