Policymakers’ goal of rolling out vaccines fast and evenly is clear — to erase volatility in the bond market and make debt the cheapest it’s ever been to discourage saving and encourage investment.
Their hope rests on the premise that cheap cash motivates companies to invest and hire as rising asset prices make people more confident and ready to spend.
The inevitable side effect, obviously, is even more risky asset volatility as investors chase returns around the world.
By Dave Allen for Discount Gold & Silver
The world’s economies are facing a tougher start to 2021 than expected, as Covid-19 infections pick up and the early rollout of vaccinations is slow.
While most mainstream economists believe global growth will still rebound quickly from the recession — at some point, they’re now saying it may take longer to catch fire and not be as healthy as previously thought.
But if you ask the billionaires of the world, the recession is already over.
According to a report released today by Oxfam, the top 1,000 billionaires, by December 1st, more than recovered the 30% of the wealth they collectively lost since March 18.
In other words, for the world’s richest, it
took less than 10 months to recover the financial losses caused by the pandemic
and other systemic issues.
On the other hand, the report estimates it will take more than 10 years for the world’s poorest to recover theirs.
MORE BILLIONAIRE GENEROSITY COULD HELP
According to Oxfam, the world’s 10 richest people — including Amazon CEO Jeff Bezos and Tesla founder Elon Musk — added $540 billion to their collective net worth in the last three quarters of 2020.
If they donated $80 billion, or just 15% of their take, they could keep the endangered millions above the poverty line for a year while economies rebuild.
With the rest of their 2020 profits, these 10 billionaires could pay for administering both rounds of the vaccine for every person on Earth and still come out over $300 billion ahead.
Data from the World Health Organization suggest a cost of around $9 per dose, or a total of $141.2 billion for the world’s 7.8 billion inhabitants.
Oxfam timed the release of the report to coincide with the start of this week’s virtual World Economic Forum’s Davos meeting, where its Great Reset Initiativewill be released (more on that as we learn the details).
The Oxfam report paints a stark portrait of the divide between CEOs at the top and
laborers at the bottom, many of whom have continued to work in dangerous environs, without the option to stay home.
Raj Sisodia, a business professor at Babson College and co-founder of the Conscious Capitalism movement, likened standard corporate structure to India’s caste system.
At the top sit generously paid professional, college-educated people with benefits and stock options.
They’re supported by the “chew them up and spit them out workforce” — people locked into low-paying hourly jobs, without health care, paid leave or retirement benefits.
In the last 40 years, executive pay has increased by 1,000%, while
rank-and-file worker pay has budged a paltry 12%.
Oxfam also estimates that with the additional wealth he made between March and September 2020, Amazon CEO Jeff Bezos “could have personally paid each of Amazon’s 876,000 employees a one-time $105,000 bonus and still be as wealthy as he was at the beginning of the pandemic.”
“The most effective way of getting people back on their feet in the wake of this pandemic is to build fairer, more sustainable economies that work for everyone and not just a fortunate few,”
That’s according to Oxfam America’s vice president Paul O’Brien, who added, “The Davos set, including corporate executives, must join efforts to make this a reality.”
GROWTH FORECAST TO RISE
All this talk of growing income disparities comes amid the World Bank’s downgraded prediction that the global economy will grow by 4% this year.
But double-dip recessions are now expected in Japan, the eurozone and U.K., as new restrictions to curb the virus’s spread are enforced.
And in the U.S., a surge of infections is dragging on retail spending and hiring, prompting a call by President Joe Biden for a new round of $1.9 trillion in fiscal stimulus.
Only China has managed to enter the elusive V-shaped recovery after reportedly containing the disease early, but even there consumers remain reluctant spenders, with Beijing partly locked down again.
A number of economic indicators point to a troubling 2021, with advanced economies hobbling out of the starting block and emerging economies diverging.
It’s a stark outlook facing policy makers after $12 trillion worth of government support and trillions in central bank money printing have failed to produce a recovery.
Yet, even as the outlook has darkened in the opening weeks of 2021, markets have inexplicably continued to rally on investor optimism that more stimulus and the vaccine roll out will drive a recovery.
RICH VS. POOR COUNTRIES
The U.S., U.K. and E.U. are delivering vaccines.
And while that’s good generally, it’s setting up a scenario where some parts of the world — mainly richer countries — reach herd immunity, while others — mainly poorer economies — lag behind.
The International Chamber of Commerce today published a report that estimates rich countries could lose up to $4.5 trillion of GDP if they fail to ensure developing nations have access to vaccines.
While the world’s billionaires keep getting richer, people living in poverty will become even poorer as a result of the pandemic.
The Oxfam report shows that the number of people living on less than $5.50 a day has likely increased by as much as 200 million to half a billion people at the end of 2020.
According to Development Initiatives, the poorest people in almost every country have seen their income fall due to the pandemic.
As lower-income countries struggle to deliver the essential services and social protection their citizens need, it’s the people living in poverty, particularly women and marginalized groups, who are paying the price.
Worldwide, 740 million women work in the so-called informal economy. And during the first month of the pandemic, their income fell by 60% — equivalent to over $396 billion.
Globally, women are overrepresented in the sectors of the economy that have been hardest hit by the pandemic.
If women were represented at the same rate as men in those sectors, 112 million women would no longer be at high risk of losing their incomes or jobs.
THE GOOD, BAD & UGLY
Policymakers’ goal of rolling out vaccines fast and evenly is clear — to erase volatility in the bond market and make debt the cheapest it’s ever been to discourage saving and encourage investment.
Their hope rests on the premise that cheap cash motivates companies to invest and hire as rising asset prices make people more confident and ready to spend.
The inevitable side effect, obviously, is even more risky asset volatility as investors chase returns around the world.
Their fear is that bloated asset prices eventually pop, undermining financial stability before the real economy — i.e., the vast majority of households — benefits from all that cash.