The BBC reports that the quarantined nation of Italy has decided to suspend mortgage payments "for individuals and households" indefinitely. This decision was made public by Laura Castelli, an economy minister who is also a member of the far-right "anti-vaccination, anti-Europe and anti-immigration" party, Five Star Movement. But as Financial Times points out, this suspension is not worth much for most Italians because property ownership is low in that country ("...just 13 per cent of all Italian households had a property with an outstanding loan or mortgage against it").
What this means is it would help those who are rich enough to have a mortgage or two. If the same policy were implemented in the US, however, it would have a deeper effect (property ownership rates are around 65 percent). But we must not stop there. What must also be considered is the suspension of all rents as well, and this should include those imposed on small businesses.
If you think any of this thinking sounds iffy, I really want you to think about these hard facts, which concern the present state of the US's financial sector.
We are now reaching a point of this crisis when something dramatic needs to be done to prevent a recession. The strike of the rich seems to be here to stay. The Dow Jones suffered huge losses again (a 6 percent fall on March 11). But what many don't know is that before the virus crisis crashed the long-fragile markets, the financial sector was already receiving a massive backdoor bailout through a quantitative easing program that re-exhumed the repurchase market (it died in October of 2008; it died again in September, 2019). The fed announced on Monday, March 9, that it would increase the size of this bailout, which, by the way, was not authorized by the public, despite the fact the cash is very much owned by the public.
The New York Federal Reserve said Monday that it will increase the amount of money it is offering to banks for their short-term funding needs.
As part of its continuing efforts to make sure the funding, or repo, markets are working properly, the central bank said it will up the amount it offers in overnight operations from $100 billion to $150 billion through Thursday.
In addition, it will increase the two-week repo operation offerings from at least $20 billion to at least $45 billion.
Repo operations involve banks posting high-quality collateral like Treasurys in exchange for operating cash.
In February, it was reported that the fed had pumped a stunning $500 billion into the repo market since the under-reported crash of September 2019. With the banks now in deep trouble, we can expect that they will make more and louder and pressing demands for the only thing that's keeping their markets alive, government cash. Indeed, one of the main reasons the value of stock markets inflated so rapidly between February 2010 and November 2016 was speculators expected that when the crash occurred—and they knew it would occur— Trump's government would pay for the whole mess. And, in fact, he has already begun doing so without notifying voters.
How much more of the market's junk can be piled onto the Feds' already large and still growing balance sheet? This question is finally worrying some wealth managers and even right-wing think tanks. What they understand is that there will be a point when the size of the debts on the fed's books will become very public and very political, and this visibility will result in the loss of the institutions cherished and venerated "independence." The fed will no longer be able to pretend so easily to be outside of the realm of the demos.
Careful consideration of all this will make the idea of suspending mortgages and rents sound perfectly sane. The thing that must be kept in mind is that, when it comes to our homes, we are often not paying for what a place is actually worth but what it might be worth in the future. The function of finance is to make this "might" as real as something that "done did" (a brick falling on your foot). A renter is often nothing more than the means by which a future value is realized. The future enters the present by way of their diminished wages. This results from the fact that a house or apartment can easily be transformed into what the French call a placement, a financial asset. In the time of a deadly virus, the door to this future can be closed with almost no consequences for the majority of the population. The little wealth most us have can really be possessed by a fictitious force (financial value) in a time that's very distant from now, but a virus from that same distant time can never make us sick.