“Large populations of educated under-employed people are very very dangerous to the social order” while “Jeff Bezos is having a very good crisis” — Krystal Ball, Saagar Enjeti and Joel Kotkin discuss how screwed people will be, especially young people, when the active coronavirus era ends.
By Thomas Neuburger. Originally published at DownWithTyranny!
“What will we break if the next thing that breaks is us?”
—Yours truly
As regular readers know, I’ve been concerned about the “coronavirus endgame” in this country for quite some time. “What will we break if the next thing that breaks is us?” is a question that’s always on my mind (see “Covid by Country — America Leads the Pack“). People are going stir-crazy; I see it all around me and I live in one of the saner cities. Yet we’re looking at a relentless 20,000 new cases per day, every day like a clock, while other, saner nations, France for example, are seeing drops of up to 90%.
Readers of this site already know what the medical outlook will be if the country opens too soon or too quickly (for example, check out “You May Think/Wish You Are Done With The Pandemic… But That Is Not How It Works“).
But the financial consequences of a prolonged coronavirus closure will be even more devastating. In the video above, futurist Joel Kotkin discusses the problems that will be faced by the young, by those in the inner cities, and especially by those who work in hard-hit industries like hospitality. Put simply, a great many people who are currently sustained by unemployment benefits, will lose those benefits while also losing the jobs they expected to return to when the crisis ends.
But the biggest worry isn’t lost current income; it’s the additional overhang of massive private debt, a burden that weighs heavily on almost every adult in the country. How will out-of-work or newly part-time Americans pay their mortgages, their rent, their student debt, their credit card debt, their medical debt? Again, put simply, they won’t.
And if they don’t, what then? It’s a core principle of the Obama era that “no creditor shall be harmed by an economic crisis.” Millions lost their homes in the foreclosure crisis of 2008, but after the collapse of Lehman Brothers, no banker or holder of worthless casino-like derivatives was not made 100% whole, not Goldman Sachs, not AIG, not any of them.
This time round, the government, with bipartisan approval, is already throwing cash at big businesses to keep them afloat — David Dayen calls it a “money cannon” — and this is especially true in the bond market, where the Fed is backstopping almost all corporate borrowing (see this excellent analysis, “Corporate Rescue: How the Fed Bailed Out the Investor Class Without Spending a Cent“).
Dayen: “Boeing, the basket-case aircraft maker with a sketchy record of keeping planes in the sky ‘rejected’ a federal bailout after issuing $25 billion in bonds. But that bond issuance was entirely made possible by the Fed’s implicit guarantee of corporate bond markets.”
Yet millions will need help. For example, under the headline “Evictions expected to spike as states end moratoriums that offered relief during COVID-19,” USA Today writes, “Twenty-four states are processing evictions again, and that number is likely to climb to at least 30 states by the end of June.”
Not all renters in those jurisdictions are vulnerable. Nearly 30% continue to be protected by a federal moratorium under the Coronavirus Aid, Relief and Economic Security Act that will remain in place until July 25. The rest … live in properties that are either not subsidized by the federal government or are owned by landlords with loans that are not federally backed.
For these unprotected renters, the threat of eviction is very real – especially for those at the bottom of the economic ladder. Tens of millions of workers are unemployed, and the economy is likely to remain shaky until there’s a vaccine and consumers feel safe enough to travel, dine out and go to theme parks and movies again. Homelessness could come at any time. [emphasis added]
July 25 is close, a lot closer than this year’s election in fact. Millions of “unprotected renters” — and many protected ones — will face eviction by September. Will the government treat these victims like they treated Boeing and backstop their debts by opening the Fed money window wide and often? Or, like the Obama government before them, will the good people in this government keep just the donor class afloat?
The government faces a problem. One solution, an obvious one, is to declare a debt jubilee. After all, it’s rightly said that “debts that can’t be repaid won’t be repaid,” and the economist Michael Hudson has written often that in times like these, the alternative to debt forgiveness is a depression. But there will be no debt forgiveness for actual humans if the “no creditor shall suffer” rule still holds true, and it looks from this government’s actions — Congress and the administration alike — that it does.
So what will the country, its actual people, do then? Your guess is as good as mine, but it may not be pretty to watch — or easy live surrounded by.
What will we break if the next thing that breaks is us? We might break everything we can get our hands on, the collective, stretched-to-the-limit, breaking-point we. And that’s before people go to the polls to vote.
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Francis Fukuyama writes in “The Origins of Political Order”, regarding pre-revolution France:
Many, many parallels to the modern-day United States there. But the the majority of those at the “top of the hierachy” don’t recognise the bankruptcy of the system. Bernie was the exception, but beyond that, there are people like Pelosi with her dedicated ice cream freezer and Joe Biden (about whom, the less said the better) who profoundly and fundamentally don’t understand things like “my landlord will throw me out on the street while I’m unemployed” and “I can’t visit the doctor because I need to buy food”.
The laughable support for the unemployed in the US is going to come back and bite the elites: having a significant portion of your population being angry, broke and with a lot of free time on their hands is exactly the sort of material from which revolutions are made.
It is already happening. The Capitol Hill Autonomous Zone in Seattle rhymes with the Paris Commune.
It really doesn’t. The CHAZ is a complete mess that is already imploding in on itself.
In the Great Financial Crisis Canada didn’t have nearly the problem the US did with people losing their homes. Plus I was young and not paying attention and the media would inevitably spin the disaster as the fault of foolish borrowers…
So I don’t have much of a reference point for what is coming but I’m horrified of what the consequences for renters are going to be (in both of those countries).
I can’t wrap my head around how so many people might lose their homes this time, and it will also be clear that these aren’t just profligate people who “deserved it”.
Can this really just happen?
Fortunately, for the US incumbents, they will be unable to appear in public, because CV. Otherwise, there might be assassinations.
Perhaps, for this reason, the Dems will agree with Trump to postpone the November election.
Assassinations can also be inside jobs. Think Anwar Sadat and Indira Gandhi and you have the idea.
Inside job assassinations only happen abroad, never at home!
Great post, thanks Jeri.
One answer would be for the government to pay the rent until unemployment subsides.
There is a proposal in California to do just that………..
Proposed legislation in California ( SB 1410) would have the state pay for 90% of missed rents for up to seven months, if renters can demonstrate that they had been financially impacted by COVID-19.
If a landlord accepts payments from the state, they would give up pursuing the remaining 10% of missed rents and agree not to charge late fees or raise the rent for a year.
This subsidy would be retroactive to April 1st.
On a national basis, this would cost about $120 billion if it stays in force for one year. If unemployment eases up sooner than that, the program can be pared back.
Landlords would then have the cash flow to cover their own debts, and evictions would be minimized.
Of course, the Democrats answer is “Pay the LANDLORD, not the renter.”
If they’re going to give away money, why not give it to the renters and let THEM decide what would be smarter…paying back rent or moving. Instead, the tenants desires are totally cut out of the equation and the Democrats pay the rentiers.
Yep, sounds just like the Democrats.
price supports, wtf… but if history is any judge it’s just another one along the lines of “medicare for covid” a talking point for the neighborhood conversation such that the consensus is “why do you care if you get it, it’s free care for covid” which is of course completely false…in this case it’s likely to be considered an active policy long after it’s been deposited in the legislative waste bin.
The older I get the more means testing (“demonstrate that they had been financially impacted by COVID-19”) is an exercise in corruption.
The fact of the matter is that you will have a large group that can demonstrate it clearly. that’s good. But there’s another group that cannot demonstrate it but were impacted, and yet another group of people who weren’t impacted but have demonstrated that they were.
It’s how all these government programs go.
I highly recommend Hannah Arendt’s essay “On Violence” which discusses the differences between Force, Violence and Political Power..
The United States has abandoned the Rule of Law, which was an incredibly foolish thing to do.
The Rule of Law protects ALL of us, and particularly the wealthy.
We saw the result in the recent demonstrations, instead of acting lawfully the Police and authorities deployed force and used violence in an attempt to force compliance and intimidate the populace, they thus tossed aside any pretense of Moral Authority, the true source of Political Power.
It’s gone.
I have written here previously that I expect we will have at least 4 Million newly homeless in the USA by the time the Election comes.
There is no safety net.
And that Election is likely to be as well conducted as Georgia’s Primary.
TPTB are smugly confident that between the Surveillance State, heavily militarized Police and the National Guard that they can control things, especially with the cooperation of the Media.
They can’t.
We have an enormously complex society which requires the active cooperation of the populace to function.
And that cooperation comes from the belief that there is a place in our Society for the Majority of Americans, the belief that they matter.
When the Authorities make it Starkly clear that the People do not matter, that cooperation evaporates.
For those who don’t want to read the book – a shorter version:
http://www2.kobe-u.ac.jp/~alexroni/IPD%202019%20readings/IPD1%202019%20No.8/A%20Special%20Supplement_%20Reflections%20on%20Violence%20by%20Hannah%20Arendt%20_%20The%20New%20Yor.pdf
I can see a horrible scenario developing for the November US election:
Unemployment ,rental evictions and other economic chaos from Covid19, combined with established systemic disenfranchisement of many US citizens, results in record low voter turnout.
Despite low voter turnout Democrats win Presidential election because of atrocious management of Covid19 by Trump and resulting economic depression ( we are not even close to there yet),
Trump declares election null and void due to low voter turnout and refuses to leave White House.
All Hell Breaks Loose.
I hope this does not happen, but it might do the way things are going.
Then again, maybe it is the only way to achieve necessary change: the “Change from Within” option offered by Bernie has been sabotaged twice by the DNC.
What’s clear is that rents have not kept pace with wages.
However landlords whine that they can’t pay their mortgages or pay their bills. They’re right. I know a few. They charge the rent they charge because the cost of everything goes up: the cost of repairs, healthcare, whatever. The complaints go all the way up the chain. That money is going somewhere.
IMO, we’re just plain overvalued. Creditors need to assume the risks that they took out, but as you say Obama kicked the can on that.
This is why we have corrections or recessions or whatever.
The RE industry has always been greedy since I got my license in 1984. But rates fell and speculators took over and the rest is history.
If there isn’t a rate my landlord app yet there will be. Compete with the deadbeat tenant database run by the prop mgrs, etc.
Will be challenging having the Sheriff evicting people in the current policing climate esp in BLM hoods.
If the Dems would just play hardball with Mitch, if Biden saw this as a winning issue
or if pigs could fly…