Thread by @doctorow

The phrase "Wall Street Versus Main Street" has a nice ring to it, but what does it actually mean?

Here's a very concrete example of how policies can be rigged to benefit the finance sector while destroying the productive economy.

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The US central bank has created a "Main Street Lending Program" that is meant to be extending credit to imperilled small- and medium-sized enterprises, but so far it has only managed to lend out $531m.

ft.com/content/91b690…

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But there's another sector of the economy that is thriving in the downturn: the largest companies in America. These companies are not actually profitable for the most part, but their shares are trading at all-time highs, thanks in large part to their access to cheap credit.

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Here's how that works: the US central bank has announced that it will buy as many bonds - even junk bonds from companies that had been mismanaged to the brink of bankruptcy before the crisis - from large firms.

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The $454B that this infused into the finance sector has been used as leverage for further, privacy-sector borrowing - all told, ~$4.54 TRILLION has shown up on large corporate balance-sheets since the crisis started.

pluralistic.net/2020/08/14/sho…

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But none of that debt is accruing to companies that need it - companies that did something productive, whose employees' jobs are on the line, who provided utility to their communities.

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Instead, the money is going to mostly unprofitable giant firms, whose customers have no cash or credit with which to buy their products and services. These companies can't invest in capital or jobs - instead, they are likely to engage in financial engineering.

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That is, they'll do stock buybacks - splurging on their own shares - which will increase their share price and make their investors richer, even though the companies themselves aren't doing any better.

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The decoupling of the financial economy and the real economy is the final battle in the war between Main Street and Wall Street. It has created an economic system that @yanisvaroufakis calls "zombie postcapitalism."

pluralistic.net/2020/08/22/thi…

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It's a form of socialism for the very, very rich and brutal austerity for the rest of us, as the businesses around us implode for lack of access to capital and take the jobs with them.

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It's hard to overstate how much demand there is for corporate debt from large, mediocre firms. Junk bond issues are oversold, even as their yields reach historic lows: Ball Alumninum just raised $1.3b for a junk bond paying a mere 2.9%.

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Remember when junk bonds were called "high yield?"

The traditional argument for austerity is that government spending in support of human necessities - food, shelter, education, health - could lead to inflation.

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But the deficit hawks who won't let us feed or house our fellow citizens are fine with the crazy asset inflation engendered by runaway finance bailouts; after all, they're the ones holding those assets.

eof/