Judging by the performance of the stock market, the economic recovery from the pandemic lockdown should be swift and dramatic, a so-called V-shaped recovery.
If only it were true.
The stock market’s recent gains don’t tell the full story of the absolute mess the US economy finds itself in, even as the worst of the coronavirus is behind us. Rather, the gains in equity prices are more of an indication of the uneven stimulus methods employed by the feds. These measures will almost certainly benefit Wall Street and market speculation — even as their impact on Main Street will be slow to come.
Wall Street executives and analysts predict a tale of two economies: Wall Street traders will make money, while Main Street businesses face economic conditions not seen since the Great Depression.
I hope my Wall Street sources are wrong. I hope the money earmarked for small businesses and individuals as part of the $2 trillion rescue package will prevent the economy from falling off a cliff. I hope the money made on Wall Street trades will trickle down to small businesses when the economy opens up.
But there is good reason to believe the trickle-down will be pretty thin. Wall Street may recover fast as the economy founders.
The Federal Reserve is pumping an estimated $10 trillion in liquidity into the financial system. That’s essentially earmarked for Wall Street. These trillions flowed into just about every corner of high finance; the Fed’s new programs even allowed it to buy up mortgage-backed securities pegged to strip malls that were teetering before the pandemic hit.
You read that right: The Fed is now bailing out Wall Streeters who bet on strip malls.
What do the rest of us get? Initially, the White House bragged that the rescue package for individuals and mom-and-pop shops was far larger than $2 trillion, because that headline figure didn’t count loan forgiveness and other measures that were coming.
In reality, the Main Street rescue hasn’t measured up to these boasts. Congress is still fighting over whether to add an extra $250 billion on top of the $350 billion in low-interest and forgivable loans to support small businesses, which employ nearly half of all Americans. – READ MORE
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