Classic Trumpian economic policy, preying on chaos. Trump pimps a “V-shaped” recovery in time to re-elect him. Nope, probably not happening. DC is barely keeping the US economy together because the GOP intends to rebuild it on the victims of the pandemic. Bill Blain does a rant on this.
… The Coronavirus has completely turned the global economy on its head. It will create the most profound changes to the way we live and our future prospects – we are all beginning to realise that. There is not going to be a V-Shaped recovery. Many lives will be shattered and ruined in its wake.
Yes, what I saw yesterday confirms two terrible truth we’ve long denied:
1) The system was already rotten to its very core before Coronavirus triggered the coming depression. This was coming and is overdue.
2) Those responsible for that rotten core will likely walk away richer, while the poor working men and women that struggle, scrimp and suffer spending their lives working for them will inevitably get poorer.
What has made me so angry? Boeing.
Boeing has launched an extremely successful multi-tranche $25 billion bond deal. The issue solves all its immediate funding needs. It enables the company to walk away from difficult bailout discussions. It claims its access to market capital demonstrates its soundness – which is utter bollchocks – and that it doesn’t need a government rescue. The issue of moral hazard for government is avoided. Boeing will survive – for time being – as is.
It’s a crock of s**t.
The bond deal was snapped up by investors. It does offer a small increase in yield if it’s downgraded to junk, and an 5.15% yield on the 10-year tranche. Buyers are unconcerned the company is hemorrhaging money, has been downgraded to the cusp of junk, faces massive lawsuits over the B-737 Max, has comprised on quality and safety, is laying staff off in droves, and is seeing orders cancelled around the globe.
Nope… Investors love it.
They wanted to buy – even though it looks to be priced very aggressively for a company with such obvious crisis emblazoned across it. The brutal reality is investors know Boeing is such a central part of the US Military-Industrial-Aerospace complex, with so many other contractors and jobs dependent upon it, that the US government has no choice but to backstop it. It’s the industrial equivalent of Too-Big-To-Fail.
The get-out-of-jail-card is there in plain sight – The Fed’s QE Infinity programme can buy as much toxic Boeing bonds as the market cares to lob at them. As we know from the Taper-Tantrum a few years back, bond holders have an infinite put back to the Fed. As long as it was investment grade back in March it qualifies for the Fed… No one cares about the economic reality facing the company.
Exhibit Two: Bill Blain's most excellent summary of what this means with the example of Boeing: https://t.co/zg0ohhUvDy
Yesterday, US unemployment hits 30 million. Yesterday, a company whose business model is in flames raises $25 billion. Thanks Uncle Fed.
— Mark Blyth (@MkBlyth) May 1, 2020
Boeing raised $25 billion through a bond offering, which the planemaker said helped it avoid taking financial assistance that President Trump has repeatedly vowed to give the company https://t.co/kwnaymVQAN pic.twitter.com/zKEbDTQtGD
— Reuters (@Reuters) May 1, 2020
Seattle will survive even if the national economy will suffer.
Gov. Jay Inslee has released a four-phase plan to guide the reopening of Washington's economy and amenities. Here's an estimate of when things will start to open back up. https://t.co/f543D3kbCC
— The Seattle Times (@seattletimes) May 1, 2020
One report that tries to predict what the eventual regional recovery will look like using population density data. Very large cities will suffer, and smaller cities will be the beneficiaries of the pandemic in this report by Moody’s.
The U.S. economy may well be in its darkest moment since the Great Depression, but to borrow a line from a story set in that period, the sun will come out tomorrow. Although it is far too early to predict with certainty where that sun will shine most brightly, it is possible to begin to think about long-term regional ramifications.The biggest losers. There are no winners when a global pandemic sends the economy into recession, but it is already clear that some parts of the country will be more deeply scarred. New York City’s greatest asset is a large,skilled workforce that is drawn to the fast-paced and highly interactive nature of life in the Big Apple.But activities such as riding the subway, dining in crowded restaurants, and attending Broadway shows may be viewed as inherently risky for some time, consistent with the city's status as the single-most economically exposed metro area or division.
A similar shift in thinking could damage some of the nation’s most dynamic economies in the future.These include Boston and San Francisco. Each place is resilient enough to eventually find its footing again, but out-migration could pick up in the medium term. And the generation that is growing up today could remember the impact of the COVID-19 pandemic on large, densely populated urban areas and be more likely than its predecessors to opt for less densely packed pastures in the decades to come. Firms will need to follow those workers, which could sustain a shift in regional patterns. Places that are more spacious, rely more heavily on car travel, and provide ample access to single-family housing are likely to emerge as more attractive as a result, especially among those who choose to bypass the highly urbanized Northeast.
The next big things In order to determine which places could benefit from this type of shift, population density was plotted against two measures of workforce quality, both using educational attainment. The first comparison uses data at the broad metro area level to compare population density against the share of jobs that require either a college or graduate degree. Those economies that can provide high-paying jobs to would-be city residents are especially well positioned.