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Altered States United

$1,200 bombs away for more fraud, inflation...
 
FRESH out of hospital last week, POTUS called off negotiations on a bailout bill, writes Bill Bonner in his Diary of a Rogue Economist.
 
This surprised us. We figured the Trump team would no more want to stand between voters and their free money than they would between a hungry Doberman and a greasy steak.
 
But by Wednesday, Trump's craven ministers had spelled it out for him: "Hey, you're behind in the polls."
 
Within hours, the President was tossing out the meat. He said he was "ready to sign" a giveaway to the voters of $1,200 each.
 
As a "stimulus" measure, this is a total fraud. All it will really stimulate is the Robinhood traders, neighborhood drug dealers, web-based retailers...and inflation.
 
But the false money, delivered under false pretenses, may give voters a false sense of prosperity. And then, economists will look at the spending that will inevitably follow – which they say makes up 70% of GDP – and say: "Wow...What a recovery!"
 
But if you really could "stimulate" growth by dropping money from helicopters, the skies would be full of them.
 
Even as a "relief" measure – to the poor, "hardworking" Americans, who have lost jobs and income in the COVID shutdown – "stimulus checks" are a fraud.
 
The official unemployment rate is only 8%. If that is true, it means that 92% of the workforce is still working. And yet, Mr.Trump is proposing to send out 160 million checks – with his name on them.
 
In other words, The Great Benefactor would send $1,200 each to about 150 million people who still have jobs. As an emergency relief measure!
 
But the President didn't stop there. He also proposed to immediately give the airline industry some $25 billion.
 
Why?
 
Because the big four US airlines – American, Delta, Southwest, and United – are holding about 50,000 employees by their heels...threatening to drop them.
 
With the collusion of their unions, they say either they get money from the government...or it's bombs away.
 
The last time air transportation workers blackmailed the government was back on August 3, 1981, when the air traffic controllers went on strike. They wanted more money, shorter hours...the usual things.
 
Instead, Ronald Reagan gave them 48 hours to report for work. Those who didn't – 11,000 of them – were fired. Not furloughed. Not slapped on the wrist. They lost their jobs – permanently. No muss. No fuss. Planes continued flying. New air traffic controllers were hired. Problem solved.
 
This time, no problem will be solved. The President didn't defy the blackmailers...He gave in to them.
 
Of all the dumb things that have been done with the public's money, this has to rank as one of the dumbest. But it is a natural and inevitable phase of late, degenerate capitalism.
 
First, the government destroys real capitalism. Then, it supports an ersatz version. Business...government...leaders and followers – all are altered by a new reality.
 
Together, the big four US airlines earned about $37 billion in free cash flow during the last six high-flying years. You'd think they might have held on to a little of the money...just in case they ran into some headwinds.
 
Nope. Instead, they spent every penny, and – their reality altered by the Federal Reserve's ultra-low interest rates – borrowed $14 billion more in order to buy their own shares (thus rewarding their shareholders).
 
And now, short on capital of their own, they look to the feds for a bailout...and threaten to throw their employees out of the cargo door if they don't come through with the money.
 
But why should the public pay for more employees than the industry needs?
 
If you pay money to someone to do something with no real value – say, run a poverty program...attack Iraq...provide PR services for a senator...attend a climate change symposium...hand out loans under the Paycheck Protection Program...serve on the Federal Reserve board – you might just as well throw the money away.
 
But wait...the money is counterfeit anyway. What difference does it make?
 
Well, yes...But even counterfeit money can be used to buy things.
 
Money is just the measure of the loss. The real loss is the time, food, fuel, parking places, machinery, and all the other things that are used up.
 
Those are real...and they can never be recovered. Time goes by. It doesn't come back.
 
Let's suppose you work for the federal Economic Development Administration (which the Government Accountability Office recently found to be completely useless)...or for a company such as Uber, that loses money year after year.
 
You drive your car to work...park...sit at a desk...use electricity...eat lunch...go to a meeting...go home. Everything you do, everything you touch, everyone you talk to – all of it makes the world a poorer place. Money just tells us "how much."
 
But as the week bumbled along, the altered state became clearer and clearer. Nobody in government – neither Republican nor Democrat – cares about wasting money...time...or anything else.
 
Instead, all seem intent on squandering the last of the nation's solvency.
 
On Thursday, Trump's man at the Treasury, Steven Mnuchin, said he was willing to increase the amount of the giveaway.
 
And it was worth letting the Democrats win this round, he seemed to say, if it got the money to the voters before November.
 
And then, on Friday came more thick steaks from POTUS himself. Here's Bloomberg:
"Trump Says He Now Wants Bigger Stimulus Than Democrats Offering"
"I would like to see a bigger stimulus package, frankly, than either the Democrats or the Republicans are offering," Trump said on Rush Limbaugh's radio program, saying he's going in the "exact opposite" direction from his earlier stances.
 
"I'm telling you something I don't tell anybody else because maybe it helps or maybe it hurts negotiations," Trump told Limbaugh. "I would like to see a bigger package."
 
Wow...What a guy! What a week!
 
What a hopeless mess!

Bill Bonner has co-authored a number of New York Times Bestsellers including Financial Reckoning Day, Empire of Debt and Mobs, Markets and Messiahs. In his own opinion, Bill's most recent title, A Modest Theory of Civilization: Win-Win or Lose, is his best work yet. Bill also founded The Agora, a worldwide community for private researchers and publishers, in 1979. Financial analysts within the group have exposed and predicted some of the world's biggest shifts since that time, starting with the fall of the Soviet Union back in the late 1980s, to the collapse of the Dot Com (2000) and then mortgage finance (2008) bubbles, and more recently the election of President Trump.

See full archive of Bill Bonner articles

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