Here is the history of the pandemic markets. After crashing between the middle of February and the middle of March, the markets were reinflated by two forces. The first was the government, which bailed out several bankrupt corporations directly and indirectly. The second was the hope that the US would reopen and commit to a necro-economic regime (i.e. capital accumulation during a pandemic). Then, on June 11, the markets experienced a 7 percent collapse for two reasons. The first was grim economic news from the Fed, and the second was data that showed infections were increasing in certain key states: Florida, Texas, Georgia, and Arizona.
The markets, however, gradually regained some of the ground lost between June 11 and 12. The US appeared to have an unshaken resolve to reopen business, the coronavirus task force was a thing of the past, and the Fed was in no mood to stop pumping money into the markets.
But today, Wall Street was hit by reality yet again. The novel coronavirus refuses to go away, and the US's necro-economic determination is daily shaken by a surge in infections, hospitalizations, and deaths.
Here's an "investor" quoted in the Washington Post article
"Dow tumbling "more than 700 points as surge in coronavirus cases rattles investors:"
“Just when it looks like the markets are shaking themselves free of coronavirus another bout of worry returns to put them on their back,” Russ Mould, investment director at AJ Bell, wrote in a note to investors.
The situation in Texas is so bad that one of the leading proponents of necro-economics, Gov. Greg Abbott, is basically begging Texans to stay home for now. The last thing he wants is to be forced to re-close the economy he prematurely opened. This would spell the death of necro-economics and a return to policies that privilege life over capital.
There is more bad news for the markets.
Today, the governors of New York, New Jersey, and Connecticut announced that visitors from Florida, Texas, Arizona and other hot spots will be "subject to a mandatory quarantine" and can be fined up to "$2,000 for the first violation" of this order. The European Union is also considering banning US travelers as it opens its borders. Such a move would, of course, result in a trade war with Trump. In short, the US economy is not rebounding anytime soon.
The Dow Jones Industrial Average slid about 600 points as a jump in coronavirus cases in some states raised concerns about renewed curbs on business activity https://t.co/0JBX38b26J
— The Wall Street Journal (@WSJ) June 24, 2020
This is just the start of the curb on "business activity." Because no serious action has been taken in Florida, Georgia, Texas, and Arizona, these states, which together have a GDP of about $3.4 trillion under conventional economic conditions (this is about a sixth of the US's GDP, $20 trillion), will experience at least a month or more of a coronavirus storm that will require, if action is finally taken in the coming days (which is unlikely), at least a three-month lockdown to significantly decline. This means a realistic re-opening of the United States will not appear until around February/March of 2021.
American political and business leaders have begun putting the brakes on the US’s gradual economic reopening:
- Apple is closing its seven stores in Houston
- North Carolina is pausing plans to ease lockdown restrictions https://t.co/Ko8lYf7EMU
— Financial Times (@FinancialTimes) June 24, 2020
But there is a way markets can continue rising even with the drag of a lockdown and no the scrapping of necro-economics. This requires the radical disconnection of corporate profits in the traditional sense from speculative profits. This is not as crazy as it sounds. The financial structure for speculative profits without profits is already in existence. All a blue-chip corporation has to do is continue borrowing with no commitment to repay the loans. Boeing has already shown the world how this might work. After selling $25 billion worth of bonds backed by the state, its market value sharply improved impressively. Meaning, Boeing's top brass made profits without profits. And all that's needed to keep this ghost of a gravy train going is to make products not for profit but to maintain access to an indefinite amount of credit.
If this possibility still sounds outlandish to you, I recommend we turn to a 2019 book, Time for Money, by the sociologist Lisa Adkins. The key insight in her book concerns the wages of the average American consumer of our times. Before the 1980s and the neo-proprietarian revolution, American wages, for the most part, matched or were even above the costs of basic cultural maintenance, biological reproduction, and spiritual recreation. Today, most workers experience a growing gap between wages and these basic costs. And this gap is increasingly (forever) filled by borrowing. So far, nothing new. Adkins adds this important twist: Wall Street makes profits not from the probability of the repayment of gap-filling consumer debts but on the possibility of permanent consumer payments.
[T]he process of securitization is not only central to the intense productivity of money and finance in regard to capital accumulation but integral to a range of critical developments in the political economy of money, including in consumer finance markets, that is, markets for mortgages and personal loans. These developments include expansions and extensions to these markets as well as transformations to mortgages and other forms of consumer finance products. They also include transformations to the calculus of consumer borrowing and, in particular, the emergence of what I term... a calculus of securitized debt. This calculus embeds debt and borrowing not in the probables of repayment but in the possibles of servicing debt, that is, in the possibles of payment. It is these transformations, I suggest, that are at the heart of the explosion of debt and indebtedness, including debt that outruns working and lived lives and debt that if indexed against income can never be repaid.What financial markets want from households is the conversion of debts into life-long payment streams that can be securitized and sold as assets on the market. Repayment is nothing but a dream in a dream.
The money of wages, then, becomes itself a source of unconventional profits. Something along these lines can happen with corporate America in the age of the pandemic. A blue-chip company could simply make products (planes, cars, washing machines, what have you) not with the goal of turning a profit in the conventional sense (a seller/buyer exchange) but with the goal of accessing loans that can be used to repurchase stock and increase the value of shares. Because this would cut production costs considerably for the makers of commodities, and the Federal Reserve Bank's balance sheet is essentially limitless, this spectral business of profits without profits could go on for years. The history of capitalism is nothing but a series of innovations that make profits more and more potent as they become more and more insubstantial.