“Now this is truly frightening,” New York attorney and professional wag Jack Lester wrote recently. “When Cramer is confident we know we’re headed for bad times."
Yesterday, Cramer might just have had an "Oops, I Did It Again" moment.
"I'm feeling more confident about the future," Cramer said. "When you look at the facts, I think there's reason to be more hopeful than we have been. The worst case scenario's been taken off the table.”
Cramer pointed to both the $2.2 trillion CARES Act bailout and the Federal Reserve’s move to "go nuclear" with a $2.3 trillion bond-buying program for troubled companies and local governments.
On the same day, the International Monetary Fund predicted a global recession, with growth headed for its worst performance since the Great Depression. The IMF predicted the world economy will contract by 3 percent in 2020. In the U.S., the IMF predicted that the gross domestic product would fall by 5.9% in 2020, with the economy not quite making up the lost ground, growing by 4.7% in 2021.
Which is it?
Both, apparently. In a series of interviews with Business Insider, former World Bank chief economist and Nobel Prize-winner Joseph Stiglitz predicted that the recession would be relatively short-lived, but the pandemic's economic consequences are likely to be disastrous for individuals. Like many economists, Stiglitz predicts unemployment as high as 20-30 percent. When jobs come back, there may not be as many and they may not be the same kinds of jobs. In the meantime, consumer demand will atrophy and bankruptcy rates will soar.
Bob Zwick, founder of the financial services company CR Software, said two programs designed to prevent layoffs may actually make the situation worse. The Economic Injury Disaster Loan program, or EIDL, which received up to $10 billion to provide bridge grants within 3 days, has been backed up for weeks by outdated SBA computers.
So has the $349 billion Paycheck Protection Plan. That's not the least of the problems with the #PPP, as it's trending on Twitter. The PPP was supposed to incentivize small businesses to keep employees, but by making big banks the intermediaries the real beneficiaries are turning out to be larger, well-connected companies and the banks themselves, Zwick said.
"The idea was that they would loan the companies money, 80 percent of which had to be used for their payroll," Zwick said. "If the companies didn’t fire people, at the end of the day there was a possibility the loans would be forgiven.
"Here's the problem. They're asking Citibank and Wells Fargo to loan money to these people they don't know in companies that might go bankrupt. And they're saying we'll give you the money later.
"It’s a fucked up plan. How about just a direct grant to small businesses? Say: 'OK, let us fund your payroll."
Rep. Pramila Jayapal of Washington state, known for being part of the "posse" of Progressive Democrats,is sponsoring a bill to do just that by subsidizing employee paychecks. In a sign of just how serious the economic crisis is becoming, Republican Josh Hawley of Missouri, the deep-red conservative who defeated Claire McCaskill in 2016, is sponsoring a similar plan in the Senate. Hawley’s proposal would provide assistance for every U.S. company affected by the crisis — whether they have one employee or 100,000 — so the businesses can keep workers on the payroll at 80 percent of their wages, up to the national median of about $33,000. Gig economy folks would receive the same aid. Additional credits would incentivize firms that rehire employees. Generational affinities may outweigh ideology when it comes to understanding the exigencies of survival: Jayapal is 54, and at 40, Hawley, a graduate of Stanford University and Yale Law School, is the youngest member of the U.S. Senate.
In an interview with the Philadelphia Inquirer, Stiglitz warned that if government and business don't join forces to make workers whole, the bailout risked repeating the mistakes the Obama administration made during the 2008 economic meltdown.
"It’s the difference between top-down trickle down economics and a bottoms-up approach," he said. "What we did in 2008 was trickle-down economics where we gave a lot of money to the banks, and we assumed that somehow everybody would benefit. We got an important lesson in the first three years of the recovery: 91% of the increase in income went to the top 1%. It didn’t trickle down and millions lost their homes, their jobs, and [endured] an enormous amount of suffering.
"I distinguish very carefully, both in 2008 and now again, between saving the corporations, and their jobs. We might need to lend money to these companies [as] warrants or convertible bonds so that we participate in the upside as well as the downside and get compensated for the risk. What the airline industry wants is an outright gift and that makes absolutely no sense."
Another problem is that the current bailout is estimated to float the nation's economy for only 8 weeks. As Congress appeared deadlocked on additional aid, the contrast between upbeat stock news and the troubles of ordinary Americans did not go unremarked. New York's Alexandria Ocasio-Cortez tweeted a photo of Cramer against a weirdly post-modern backdrop of a TV screen announcing the Dow's best week with a chyron announcing record job losses at the bottom. The photo with AOC's brutal but clever tweet "When Late Stage Capitalism Takes a Selfie" was shared 43,000 times.
Cramer, for his part, argued that he was merely reporting the facts.
“At the end of the day, the stock market’s made up of big, huge companies, not the small-to-medium-sized businesses that are the backbone of our economy,” Cramer said in response to the outcry after AOC's tweet. “You don’t have to like it — I know I don’t — but it’s the big dogs with pristine balance sheets and gigantic scale that can survive this lockdown.”
What does that mean for Americans worried about retirement? Chris Tombrello, a former quant with TD Ameritrade, predicted that the market will continue to gyrate for the next few months, with high-frequency trading exaggerating the ups and downs. He anticipates a dip in mid-May after earnings are reported, but said he believes generally "the market has experienced being on a ventilator and is now returning to the workplace fortified with natural antibodies."
The long-term damage to ordinary Americans is another story. While 17 million Americans have filed unemployment claims in the past month, the Washington Post reports that France and Germany are controlling unemployment by doing exactly what both Stiglitz and Zwick recommend. Both countries are looking roughly 7 percent unemployment instead of the 20 percent predicted in the U.S.
Lawrence Summers, the former Harvard president who served in both the Clinton and Obama administrations, predicted that the nation's unemployment figures won't improve until a year-and-a-half after the pandemic has been wrestled down.
While Stiglitz and Summers have found themselves on opposing sides, with Stiglitz calling for economic reform and Summers defending the status quo, they are united in their concern about the nature of the bailout. Summers harshly criticized Trump's firing of inspector generals, which he called a warning sign of fraud and waste.
"In terms of execution, we have a government that is run like a highly opportunistic family real-estate business where people who aren't in the family aren't treated so well. And to turn the running of the United States in the most complex public-policy situation in this century over to that has to give grave cause for concern," Summers told Business Insider.
Both men will figure prominently is the debate as the election draws near. Stiglitz, a professor at Columbia University who served as Chairman of the Council of Economic Advisors in the Clinton administration, is known as a champion of economic reform, both globally and nationally, and a critic of laissez-faire economics.
The Obama administration passed him over for a national policy-making position in favor of Goldman, Sachs alum Tim Geithner and the more establishment-friendly Summers. A supporter of the economic proposals of Elizabeth Warren and Bernie Sanders, Stiglitz, along with Katie Porter, was on Warren's list of appointees proffered in return for her endorsement of Hillary Clinton in 2016.
The next administration's economic advisors will matter -- a lot. Summers, among others, predicts that the pandemic will permanently alter the country's economy. Economists predict that 1 in 10 businesses will fail over the next several months, and when things get back to normal, the New Normal could have far fewer jobs. Brick and mortar retail and the travel industry are already decimated.
We should get a preview of that New Normal over the next months. The New York Times reported that Austria is allowing small shops to resume business, while Denmark is reopening schools. The Czech Republic is planning to lift a travel ban.
"But even as the number of new infections appears to be plateauing in several European countries, the message from leaders is clear: The next phase is not a return to normality. It is learning how to live with the pandemic — possibly for quite a long time," wrote the Times.
Will the New Normal still have at its core the Old Normal's ticking time bomb of deepening inequality? It's not the only litmus test, but when Bernie Sanders endorsed Joe Biden, the two alter kockers pledged to set up task forces to solve the enormous problems left by the Trump administration. Look for Stiglitz's name as the brain trust is assembled. If it's not there, that could tell us a lot.
-- The Editors
MONEY: A Playlist from Brian Cullman
Because it isn't really about money.
If Money Grew On Trees :The Toppers
Early doo-wop group The Toppers are best remembered for their tender hit BABY, LET ME BANG YOUR BOX
This was from a few years earlier (1944).
When A Man Is Poor : Lord Kitchener
Aldwyn Roberts, better known as Lord Kitchener, was one of Trinidad’s great calypsonians, with sly, understated songs about social & sexual & financial inequality. If Bernie Sanders could sing (and had taken a few quaaludes)...
Money Fall Out The Sky : Cool It Reba
Cool It Reba was one of the great lost New York groups of the 1980’s, led by David Hansen, formerly of legendary Providence band The Young Adults.
“Somewhere in my world there is a street that I read about in a book
I haven’t been able to find it no matter how hard I look
There’s a street you can walk down where money fall out the sky.
Sammy Davis Junior knows where the street is
Colonel Tom Parker knows where the street is
Leroy Neiman knows where the street is
I don’t know where the street is…”
Dinero : Texas Tornados
The Texas Tornados were a supergroup led by Doug Sahm, Augie Meyers & Freddy Fender.
I always thought the lyrics to this song were “If you’ve got the dinero, I’ve got a sombrero.
Cash Money : MC Solaar
MC Solaar is a French rapper & actor originally from Senegal.
Cash money is cash money in any language.
Gimme Gimme Blues : David Moss & Michael Rodach
David Moss is the co-founder and artistic director of The Institute of The Living Voice in Antwerp.
Years ago, an interviewer asked him if he was crazy.
“No,” he explained. “ I just like to sing that way.”