The Fed is doing some very alarming stuff

Should you care about the Federal Reserve? Sometimes called the Federal Reserve Bank (it’s not a real bank), but generally just “The Fed”, the Fed basically controls our money supply. It does this with virtually no oversight by those who ultimately hold the bag when it makes mistakes: us taxpayers.

I am most alarmed by what the Federal Reserve has been up to lately. It looks both completely sane and completely crazy. To start, the Fed cut interest rates banks can charge to borrow from each other, or the Fed itself, to zero. This happened in 2008 too and it’s their way of stimulating the economy. I noted in an earlier post that this seemed to be the last trick in their toolbox. Since both consumers and companies were already in hoc to the maximum, this wasn’t a viable way to stimulate growth anymore. But it was what they knew how to do, so they did it.

But the Fed has invented some new tricks they haven’t done before. The Fed has basically decided to bail out any business, at least those that are publicly traded. In the last recession, a lot of large businesses were too big to fail. Now it looks like most businesses in the United States that are publicly traded are too big to fail, in the eyes of the Fed.

Most of these businesses got in trouble because of the cheap money the Fed has promulgated since the previous recession. With no rules, businesses borrowed instead of investing and saving. Mostly they used borrowed money to buy back their own stock. When the stock price invariably went up due to supply and demand, its executives (whose pay is largely based on stock prices, which they get at a discount) sell them and profit. In short, the Fed’s policies of making money so cheap in many ways made this new depression so much worse.

During the Great Recession the Fed also bought a lot of corporate stock too, to show faith in the market. It helped stabilize things and turned the market around, although it took a very long time. Now the Fed is buying corporate debt in unlimited quantities. Basically a business tells the Fed gets to say how much their debt is worth as a share of their company, and the Fed will buy it, no questions asked. Essentially the Fed is paying inflated prices for very shaky corporate debt that no one else wants to buy.

In exchange, companies get some ready cash to help them tie things over. Maybe the Fed will recoup its investment and eventually even make a profit for us taxpayers. But this money was created and doled out with essentially no oversight. The Fed is not accountable to anyone. While there are certain things the Fed cannot do, anything not specifically prohibited is in theory legal.

If I were to load up my family’s portfolio with junk bonds, my spouse would likely divorce me. But when the Fed does the same, there’s no spouse to object, and no oversight to worry. You have to hope the Fed knows what it’s doing, and Donald Trump appointed many of them. God help us.

I don’t have much trust in the Fed. These tactics strike me as desperate. Moreover, they are letting the rich reap a huge windfall. Many of them were like me: smart enough to sell at peak market when we knew it wouldn’t last due to COVID-19. They bought more stock at low market, toward the middle of March. And now with the stock market reaching their pre-crash highs again — due to the Fed buying so much stock that supply and demand is inflating their prices artificially again, despite the ruined economy — they are cashing in again. It appears that the Fed is exacerbating income inequality in the name of keeping the economy from collapsing even more. The Fed is becoming a wealth distribution mechanism that seems to favor the rich.

A rational government should not tolerate this. The Fed is basically trying to keep American capitalism, as we have known it, going. It’s just that it looks like American capitalism is in its death throes. A model of capitalism that is inured from the consequences its actions like the environment costs it inflicts on the rest of us deserves to die. If it is to be replaced at all, it should be with a version of capitalism that works in the interests of the people, not against it.

In short, the Fed’s actions strike me overall as desperate and very chancy. It needs oversight and reigning in. Consumer advocates, and not Wall Street insiders should oversee it. It needs to be accountable.

Things should never go back to the way they were, if we’re smart

I suspect that in retrospect March 2020 won’t be remembered so much for the COVID-19 crisis, but as the catalyst for finally remaking our society into one that works for the people again.

It’s all pretty crazy and hellish right now, but it’s made crazier and more hellish because we’re trying to deal with COVID-19 and our economic crisis by using old rules that no longer work.

Take our Federal Reserve, for example. In reality, the Fed doesn’t have a whole lot of tools left in its toolbox. Its most effective remaining tool is that it prints the money. By effectively throwing out unlimited sums of money, it’s trying to keep our economy from collapsing altogether by underwriting our banks and businesses. It seems to be buying us some time, for example, by keeping banks flush with cash when in times before the Federal Reserve (the Great Depression) there would be a run on banks. But dropping the federal funds rate to 0% isn’t going to help at all. It did in 2008, but won’t anymore. Both businesses and consumers are already in hoc up to their eyeballs. We already can’t afford the debt we got. It’s hard to see how acquiring more of it will help the economy.

In just a few weeks our real unemployment rate is now likely over ten percent. Much of our economy has ground to a halt. It may prove to be ephemeral, which I first thought, but with some weeks to look at what’s going on, I no longer think so.

COVID-19 has thrown nearly the perfect monkey wrench into our economy, which had been hanging by a thread because it was based everyone spending beyond their means. Most companies made it worse. Instead of hoarding cash when times were good to get, they used borrowed money to buy back their own stock, which executives then sold to increase their personal wealth and their companies more fragile. Most people just get by, or have fallen behind, a victim of wages that rarely increase. Mostly, our productivity went into shareholders’ pockets instead. If they couldn’t afford the debt they had before the crisis, they won’t be able to now that it’s here.

All this was made considerably worse by our administration’s counterproductive approach to dealing with a pandemic. The $2.2T relief bill passed by Congress and signed into law won’t be nearly enough. A one time payment of $1200 per person and $500 per child won’t get us through this crisis. At best it will pay a month of rent or a house payment, plus a few other expenses. Expanded unemployment benefits will be a lot more meaningful to most people, if they can get them. It’s hard to apply for unemployment when so many others are doing the same thing. Until the U.S. Treasury bails out states’ unemployment funds, the funds in these accounts won’t last long.

Most likely COVID-19 will keep us at home for months, and when we are allowed to open businesses again, it will be tentatively. The doctors that Donald Trump refuses to listen to expect a resurgence of the virus later in the year unless we maintain strict social distancing. A vaccine is likely at least a year away, so things couldn’t go back to normal until those of us who don’t have it are inoculated against the virus. So most likely we can expect a year or more of doing what we are doing now, with systems under strain if not collapsing all around us.

But the economy really can’t come roaring back, not unless it works a lot differently. Those who get jobs back will be lucky to get what they had before and a wage similar to what they had before. Government cash will help, but it won’t be nearly enough, which will leave people more impoverished in general, and more financially fragile. Without laws requiring debt forbearance, or debt forgiveness, growth looks unlikely.

Which means the only way out is through political change, which hopefully will come in November. People generally vote in their own self interest, so there should be plenty of motivation. Then there’s Donald Trump doing the best to kill off his own supporters. Even if they are smart enough not to follow his advice, a lot of his supporters are poor white people, mostly in rural areas with health care networks that are already fraying at the seams. COVID-19 mostly hasn’t hit rural America yet, but it will, and it will make New York City look like a walk in the park.

These problems won’t solve themselves by a lack of government. You can see now what the lack of government has done: left us largely unprepared for a pandemic. Meaningful change happens through a government that acts in the people’s interests and works to proactively prevent exactly what we are going through now.

It won’t get better though if we keep doing things the way we have always done things. That’s why the Fed’s actions feel so toothless, at best postponing the inevitable. The Fed can’t innovate its way out of our crisis because it has a limited set of tools, and it’s used pretty much all of them. The Trump administration simply doesn’t have the imagination to do what needs to be done. It hopes for short term miracles, which is why Trump is promoting Hydroxychloroquine to treat COVID-19. People have died, are dying and will die for Trump’s bogus medical cures.

We the living who get through this by doing sensible things like staying at home and washing our hands regularly have an opportunity in 2021 to remake America into a country that meets our needs again. We could start to use money not to bail out companies, but instead to create a clean and green infrastructure. Then perhaps we can expect to see a real light at the end of our tunnel.

Healthy Love and Mental Health

I’ve been doing quite a bit of reading on mental health issues over the last year or so. Maybe my life is unusual in that I believe I come in contact with more people with mental health problems than most people. Or perhaps I am overly sensitized to mental health issues. But the more I learn about mental health the more I believe that the majority of us have persistent or chronic mental health issues.

A lot of us don’t seek treatment. The usual coping mechanism seems to be to ignore mental illness or just chalk up its miseries as part of the price of being alive. Some of us develop coping techniques so we can keep these issues contained in some relatively safe spot. Occasionally they pop out, often during periods of stress, to show us they are still around. Clearly for others mental health issues are so chronic and debilitating that their whole lives are filtered through the suffering and pain of their mental illnesses.

I went through a period of mild depression a couple years back. Unlike lots of people I sought treatment. For months I had no idea what was going on. I didn’t even recognize the symptoms within myself. But eventually I figured out that crying at my desk for no logical reason and enduring persistent low level headaches for weeks at a time meant something was out of kilter. It seemed strange to find myself in a psychiatrist’s office, and stranger still to be spilling my guts to a therapist. But it seemed to work for me. Within six months I was off the drugs and felt relatively back to normal. In that sense I was fortunate. My depression appears to have been situational and limited in time and scope. But I had enough of a taste of it to develop empathy for those with much more chronic mental illnesses. It also made me realize that the scope of the problem is huge and our response to it as a society is less than adequate.

It is clear from my reading that the causes of mental illness are still hard to pin down. There appears to be a genetic predisposition toward depression for many people. But it is not clear if it takes events for depression to be manifested, or whether people can get depressed solely due to a predisposition. I do believe that a lot of depression has its roots in how we coped with difficult times in our lives. And I am increasingly convinced that much of these stresses have their roots in early childhood. But they have receded so far in memory that we have no recollection of them.

I have been curious of late why good people stay with people who are toxic to them. Why on earth would a woman who has been physically and emotionally abused by her husband cling to him and say that she can’t live without him? My reading suggests that it may be a result of addictive attachment hunger issues from our early childhood.

I think this is true with me and might be one of the reasons I suffered from depression. It is also one of the reasons I have been either so naive or idealistic when it comes to romantic love. I want to believe there is someone out there who is so in tune with me that we play off against each other perfectly. This ideal person (presumably a woman) can play me like a piano, and I can play her the same way, and life is somehow a continuously pleasant buzz instead of a series of challenges and harsh realities that it often is.

I know that when I was born I was one of three boys in diapers that my mother was shuffling at the same time. As a parent who struggled through nurturing one child I know how difficult child rearing can be. I can’t imagine doing it for three young and active boys at the same time, not to mention two older girls that my mother also was mothering in 1957. In her biography my mother fessed up. I came along at a time when she was mentally and physically exhausted, and quite likely depressed (although she has never admitted to being depressed). While she loved me as any mother would love a child, she was overwhelmed with work, stress and motherhood. I was very much a “time-shared” baby. I know I didn’t get the amount of mother time that children typically get. I probably picked that up even as an infant and it affected me in some powerful ways. Although adolescence is a natural time to pull away from the parents, I pulled away particularly from my mother. The issues were I thought overly excessive Catholicism and conformity, but I now suspect that these were but catalyst issues. The likely real issue was simply that I had not gotten the quality time from my mother than I wanted as an infant or growing up and I resented it. It wasn’t until I was a teenager that I could do something about it. And unfortunately when I struck back I did it in a mean and vindictive way.

Part of my coping process until that time had been to play the “good son” role. I endeavored to be the peacemaker in a family of 10. A large family is, by its nature, a boisterous, sometimes rowdy, and always loud place. When the noise and the perceived mayhem got too bad I withdrew to my room and tried to shut it out. I latched onto my father, whom I perceived as calm and gentle mannered, unlike my rather temperamental mother. But my father also got to work with civilized people in clean and modern office environments eight hours a day. My mother was a housewife. Mothering and parenting was a 24/7/365 occupation.

As an adult I suspect I seek that which I felt I was sufficiently denied as an infant. Growing up I likely wanted to feel like I was one with my mother, and I wanted to feel special and utterly cared for by her. An inevitable part of growing up is learning to detach from the mother and confront the world alone. I was probably detached way too soon for my liking. Missing that attachment I seek it now in my marriage. But the reality is that marriage is not a supplicant relationship where I get the love I need from an authority figure. It is a relationship of equals where my responsibilities to provide love are as necessary as my wife’s obligations to me.

So my notions of how romantic love should be (shared perhaps by the majority of people in my country) are probably naive also. It is probably counterproductive and unhealthy for me to seek that sort of bonding in a marital relationship. We need to realize that we are seeking the unattainable. More importantly, if it were attainable, it would be unhealthy.

Still, for many of us adults this lingering attachment disorder echoes through our adult lives. My hope is that I have channeled these longings in appropriate ways. I have tried to have a consistent loving and nurturing relationship with my daughter. And yet sometimes I wonder if I have gone too far in the nurturing the relationship as a reaction to my attachment disorder. Since my daughter is now fourteen she is going through a natural and necessary process of pulling away from me. I wonder if I was perhaps too much of a micromanager of her life. I wonder whether I should have trusted and empowered her more earlier. If I had, would she be a more functional young adult? I don’t really know but my gut says “yes”.

It would have been smarter to know and understand this before she was born. I would have changed my parenting strategies a bit, I think. I will be upset to learn if in spite of my best efforts my daughter spends her adulthood affected by similar attachment disorders.

If so Rosie, please forgive me as I forgive my mother. I did the best I could.