The Fed Helped Companies Borrow Money. Some Laid Workers Off Anyway : NPR

Allow me to begin with a quote from the NPR piece:

“The food service giant Sysco Corp. borrowed $4 billion in March, only to lay off a third of its workforce a short time later. It’s also paying a dividend to its shareholders.“

For the past couple years I taught students “accumulate productive capital” (e.g. Sysco stock). That mantra and the facts on the ground during this bailout are consistent with a point mentioned in the Bloomberg Market Concepts training that I require of students: the statistical connection between the economy (typically measured by GDP growth) and the stock market is weak.

Let me state that another way: the connection between the economy (Main Street) and the stock market (Wall Street) is weak. Vanguard also verified the lack of GDP-stock market connection in a market predictors study. With the NPR article below, you now see a mechanism that weakens the connection: free money to corporations, laid-off workers (Main Street), and dividend payments (Wall Street). Think about who the shareholders are that receive these dividends: wealthy individuals including the corporate executives that approved the layoff and dividend payout plans. Think about the laid off workers: your friends and family that elitists attempt to vilify and then suggest those laid off workers should not receive any unemployment benefits.

So when I say “accumulate productive capital,” I suppose I advocate a “if you can’t beat them, join them” approach. However, many unemployed (and employed for that matter), simply don’t have enough to pay for both necessities and stocks.

Marx and Schumpeter predicted an end to capitalism albeit by different paths (revolution vs. gradual decomposition). Perhaps we all better take action to reverse the widening wealth gap and promote greater shared prosperity before either (or both) of those things happen.

-Dr. Moore

https://www.npr.org/2020/06/10/873190315/the-fed-is-throwing-money-around-not-everyone-is-reaping-the-benefits

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