In 2017, the news came in that three men -- Bill Gates, Jeff Bezos, and Warren Buffett -- were wealthier than the bottom half of American society or 160 million people. In fact, from 2013-2018, the number of billionaires globally rose by 40% and their collective fortune grew by 34.5%. So it shouldn't be surprising that, for the first time in history, an election campaign featured three billionaires, one already in the White House. Meanwhile, in 2019, another 31,000 people joined the ranks of the "ultra-wealthy" with assets of more than $30 million each. Yes, we're on a planet of extremes and when it comes to those extremes, add in climate change and the quick-spreading new coronavirus that the billionaire in the White House would prefer to do anything but actually deal with.
In other words, it's an increasingly small world and we're all -- rich and poor -- on the equivalent of a single vast cruise ship being buffeted (and I don't mean Warren Buffetted) by increasingly extreme winds and seas. The waters are ever rougher and while the people in the fancy cabins, well situated atop the ship with every imaginable form of help in sight, are in better shape, those crowded into the modern equivalent of steerage are in trouble deep. Yes, the coronavirus may be indiscriminate, but who can and can't work from home, to take one example, isn't; nor is the access of the rich and the bottom half of American society to health care faintly similar.
So with the return, after a year's sabbatical, of that wonderful TomDispatch regular Nomi Prins, author of Collusion: How Central Bankers Rigged the World, consider what extreme inequality truly means on a Trumpian planet in crisis. Tom
The Fed, the Virus, and Inequality
A Global Dr. Frankenstein at Work
By Nomi Prins
Whether you're invested in the stock market or not, you've likely noticed that it's been on a roller coaster lately. The White House and most of the D.C. Beltway crowd tend to equate the performance of the stock market with that of the broader economy. To President Trump's extreme chagrin, $3.18 trillion in stock market value vaporized during the last week of February. Stock markets around the world also fell dramatically. When all was said and done, $6 trillion had been at least temporarily erased from them. It was the worst week for the markets since the financial crisis of 2008 and it would only get worse from there.
In the wake of that, the Federal Reserve kicked into gear. By the first week of March, after high-level coordination among the Group of Seven (G-7) countries and their financial elites, the Fed acted as it largely had since the financial crisis, but with more intensity, giving the markets a brief shot in the arm.
In a move that Wall Street and the White House had clamored for, the Fed cut the level of interest rates by half a percentage point. The markets reacted by doing exactly the opposite of what the Fed hoped and, after having briefly soared, the Dow then tanked nearly 1,000 points that day. The next day, it rose 1,173 points (also partially attributed to Wall Street's embrace of Joe Biden's Super Tuesday results), only to plunge again soon after. Then, this Monday, within a few minutes of opening, the markets dropped more than 7%, triggering a halt in trading.
Dizzy yet? Okay. Let's take a step back.
Wall Street doesn't like uncertainty. Worries about the outbreak of, and economic fallout from, the coronavirus have stoked fears globally, only compounded by the start of an oil-price war. Big Finance doesn't deal well when its money is on the line. What's referred to as a liquidity shortage (or lack of free-flowing money) is Wall Street's deepest fear. That's what happened during the financial crisis of 2008. Under those circumstances, banks stop lending -- both to each other, to corporations, and to real people -- and look to external forces like its "lender of last resort," the Federal Reserve, and to the government to bail them out.
That's why what's transpired with the coronavirus is so illuminating. It's not like the financial crisis, but central bank reactions are similar. There is a known chain of events that underscores the transmission of diseases: close contact, shared food, a stray cough or sneeze. What's unknown with a novel virus is how long and far and deep that transmission will go into any society, how it might still mutate, and how disastrous -- as in the case of the Spanish Flu of 1918 -- the consequences could be.
On our globalized planet, the constant movement of people across borders has made the world smaller and more connected than ever. This means that it's made diseases ever more communicable and its ability to throw a monkey wrench into a globalized economic system and financial markets so much greater. People of various ages from varied cultures, religions, and economic statuses have the ability to intermingle in transit, whether at an airport, in a grocery store, or on a subway platform.
Several passengers with the coronavirus, initially confined to a cruise ship off the coast of Japan, for instance, led to fatalities and contagion elsewhere and were among the many catalysts in the spread of that disease and of associated economic problems to a distinctly globalized and previously profitable travel industry. The coronavirus threat soon impacted that industry's workers, food and drink suppliers, entertainers, crews, cleaners, and all associated family members. As a result, with other cruise ships experiencing similar problems and airlines in crisis, the travel industry was crippled, while the demand for the goods and services associated with it shrank. It even undoubtedly cost the Trump Organization, in part a travel and resort business, a penny or two.
Now, bear with me for a brief, deep dive into economics. Consider the commonly used economic term "supply chain." It's just a chain of people or businesses that interact with each other where money, goods, and services are exchanged along the way. The more interactions that take place around the world, the more global it obviously is. That's why trade wars, though initiated by leaders (and their giant egos), impact the economic lives of so many from the top down.
In a world that's seen a dramatic rise in isolationist politicians and policies, the coronavirus reminds us that we still share a planet where not everything is controllable by brute force or posturing. Medical, climate, and financial crises can spread ever more rapidly in this distinctly globalized world of ours for a variety of reasons. That's why the old adage an ounce of prevention is worth a pound of cure still holds.
The reality is that an economy based on a kind of inequality once unknown to Americans is at a crossroads and the coronavirus seems to have infected it. So even with the cards stacked in their favor, the unseemly wealthy and the denizens of Wall Street can't prevent real people from taking the brunt of the blowback. Nor will the Fed, whatever its rate cuts, nor Donald Trump, whatever his tweets, be able to prevent the majority of Americans from taking a significant hit in what's sure to be a global economic storm. Maybe they can temporarily assuage stock market concerns, but there are no guarantees.