Guest Post by Simon Black
I think one of the funniest movies of the 1980s was Brewster’s Millions.
In the movie, Richard Pryor plays Monty Brewster, a minor league baseball player who finds out that he is in line to inherit a vast $300 million fortune.
In order to inherit the money, though, Brewster must spend $30 million over the next 30 days… and if he fails to do so, he forfeits the entire inheritance.
Part of the terms of his inheritance were that Brewster couldn’t buy assets. He couldn’t just acquire a bunch of real estate or expensive paintings. He had to spend the money, not invest it.
$30 million is a ton of money, especially in 1985 when Brewster’s Millions was released. And the movie is a hilarious account of how difficult it was for Richard Pryor’s character to spend so much money so quickly.
Amazingly enough, the US federal government is starting to realize this too.
Ten days ago they passed the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act with the aim of putting cash in people’s pockets.
As I wrote to you a week ago, the law includes more than $300 billion in emergency funding for small businesses. It’s specifically aimed at helping entrepreneurs retain and pay their employees.
A week and a half later, the government seems to have realized just how difficult it is to give away $300 billion to tens of millions of businesses.
Sure, the Defense Department blows hundreds of billions of dollars all the time. They make it look easy. But they’re acquiring really expensive stuff– bombs, aircraft carriers, fighter jets, etc.
But similar to Brewster’s Millions, the Small Business Administration isn’t buying anything. They have to spend the money, sprinkling hundreds of billions of dollars across the economy as quickly as possible.
And to make matters even more difficult, they’re spending it in very small chunks as low as $10,000 each.
So the government and the banks are scrambling right now trying to figure out how to get this money into the economy, and fast.
Meanwhile, demand is incredibly high from small business owners who are looking to get a piece of that $300 billion.
Some bank websites have crashed. Others simply put a page up saying “We’re sorry, we’re unable to process your request.”
Wells Fargo (of course it had to be Wells Fargo…) announced yesterday on Twitter that they had already “reached lending capacity” for small businesses under this program, and they subsequently took down the application form.
Then the Federal Reserve reacted by announcing a new facility to ‘buy’ small business loans from the banks, which gives banks like Wells Fargo more ammunition to keep lending.
The problem, of course, is that a good chunk of these loans will never be repaid. Ever.
As I explained last week, Congress set up these loans to be “forgivable”. They’re non-recourse loans, and no personal guarantee is required. So a small business owner can take the money, never pay a penny back, and there will be no consequences (as long as the money was used for its intended purpose.)
But based on yesterday’s announcement, a ton of these loans will end up being owned by the Federal Reserve.
Bear in mind that the Federal Reserve’s total capital is just $38 billion. So $300 billion worth of small business loans (or even just a fraction of the $300 billion) would completely dwarf the Fed’s capital.
In other words, widespread loan defaults could easily wipe out the Fed’s capital, rendering the largest and most important central bank in the world insolvent.
Of course the federal government is supposed to guarantee these loans… so if a borrower defaults, the Small Business Administration will make the lender (or the Fed) whole.
But the federal government itself is insolvent! Think about it– just to be able to make this $300 billion loan guarantee, the US government has to borrow money from… the Federal Reserve!
It’s mind boggling when you think about it: the Federal Reserve prints money and loans it to the US government, so that the US government can financially guarantee the Federal Reserve.
So bizarre.
Anyhow, we’ll talk about those consequences more later. For now, my team put together a detailed report on the CARES Act and its small business loan programs.
So if you have a qualifying business (and pretty much anyone with a pulse qualifies) and you’re interested in some specifics about how to apply for one of these forgivable loans, you can download this free report.
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The secret to all criminal schemes is to always set things up to have plausible deniability. Never do anything yourself as any investigation would find only you.
The Fed, the Treasury, the banks, Wall St., etc are all in on a fantastic criminal enterprise and they’ve arranged it so that no one can be held accountable. These crooks are the best in world history.
Pretty soon, all the fat cats will have all the money they need to buy up everything and then pull the plug on what’s left of the economy. No one will go to jail as every finger will point at their co conspirators and they’re going to get away with it as usual. This is made possible by the gov’t that’s in on the scheme and they won’t prosecute themselves and their buddies.
Where does that leave Main St.? Main St. is going to be in the shiter and the corporations that survive, the big ones, will have slave labor available from then on.
The only way to get even is to totally fuck things up and then go vigilante. I smell revolution and lynchings in the not too distant future.
Covid-19 is set up just this way.
Invest in rope, lumber, pitchforks, torches, and guillotine blades.
I believe there’s a good chance that the Fed Gov will receive some vigilante push back. However, I think they will succeed in exterminating it with the bulk of the population firmly behind the gov’t due to absolute stupidity fostered by monumental ignorance as to how the game is played.
There are too many people sucking on the gov’t teat either as welfare recipients or gov’t employees, but I repeat myself. The population is too far gone to even attempt to shut this shit show down.
The rest of the world’s gov’ts are complicit with the banking and finance sectors that sustain them and there’s no place on the planet that will succeed in objecting.
Just my 2 cents.
Interesting thoughts @ Solutions Are Obvious.
I think local governments and school districts will feel the pain first. No incoming taxes to fund their operations. Their businesses like the utilities and trash pickup will be a source of some money but their convention centers and ball fields where they expect large sums will become liabilities.
Many non-essential government employees that were sent home may find a notice in mail that they have been terminated due to a lack of funds to pay them.
Does anyone think the federal government has the ability to fund all the local and country governments of all fifty States? I don’t think so.
Notice how all those in government calling for shutting down their own economies with no regard for the small businesses that support their tax base? They are cutting their own throats and don’t even have the common sense to see it.
Government is coming to a rude awakening.
I would not be surprised that by Easter people begin defying and ignoring the various lockdown orders enmass.
Then we will see what happens.
Those entities with the fewest resources will, of course, get a rude awakening first. But they don’t really count. This scam is way above the local Nazi’s. Even major cities like NY, Chicago or LA don’t count. Once we get to the state level is where things can get interesting.
States have mini armies and weapons depots. The states can counter this scam because they have sufficient resources, at least initially, and they can call upon their residents to back them up. A governor can ask the US military bases in a state to side with the state and refuse Federal orders.
But it takes a governor with balls to call for an insurrection and all governors are bought and paid for party members. They may decide, however, that since others above their pay grade at the federal level are going to get all the best graft that they want to muscle in using the only thing TPTsB understand, force. Their motives would be for self serving reasons, but their actions could become pivotal.
To succeed requires fire power equal to what the US military has and that can only come from renegade US military forces.
@ Solutions Are Obvious
The States sold out their people when their legislatures accepted the “Administrative Procedures Act.” Also the Buck Act.
The law of the land is Administrative Law; not the Constitution. We live under rules & regulations we cannot challenge. This is why State and local governments are so arrogant.
When the tax money runs out these governments will diminish in size and scope. People will go back to basic survival.
Governors will not call for resurrection because they work for the beast!
T-Bird we agree on that main point the Circle Jerk Big Club members of Wall Street to K-Street to Capital Street have been eradicating the support tax base for decades and replacing with debt leveraged derivatives of worthless paper
These so-called non essential government employees will find working for $15 an hour no benefits 20 to 30 hours a week a real bite in the ass add that to the underfunded or bankrupt pension plans and poof reality . Every where I ever worked non- essential meant unemployed BYE BYE
LOL
@Anon
Wall Street is going down. It won’t take main street with it but rather the monopoly corporations.
Just watch it play out. We are in a train wreck.
When human nature kicks in the people will throw off this virus scare and it’s lockdowns.
If for some reason people don’t wake up or rather don’t succumb to their human nature then they are dead and their fate is communism.
My sense is that people will act.
Well said solutions ? My attitude is take what you can and run because you cannot fix or stop any of this . Spend every dime on prepping for the real crash (any second now) anything left over squander on hookers and beer a true worthwhile investment
Lead.
Wells Fargo and Jon Corzine would be a match made in eternal purgatory. It’s just flabbergasting how those two entities are still in existence.
I bet most of the cash went to (((non-profits))).
A trillion here, a trillion there, pretty soon you’re talking real money.
“So the government and the banks are scrambling right now trying to figure out how to get this money into the economy, and fast.”
Really? Are they really? Because I know a way that would be easy as hell to do that and everything is already set up to do it without needing banks as middlemen. Have the IRS pull up the name and address of every single American taxpayer that worked all last year- with the exception of government employees- and if their income was between X and Y and they received an income tax return between A and B, cut them a check.
The purpose of this entire episode was to inflict maximum suffering on people and financial hardship to drive them to beg for more government intervention.
Anyone who still believes that the Government is anything other than a criminal enterprise deserves penury.
That’s kinda/sorta what’s supposed to be happening now.
Why not just suspend payroll taxes for 1 year? That’d actually help the people who actually need it.
Just Sayin’
And the music played on.
Yo,
Jew or not jew?
Michael Scott : Just say, “I want to squeeze them”. It’s code, she’ll know what it means.
“The best way to rob a bank is to own one.” I have a sole proprietorship & have come to the conclusion that these loans are a poisoned chalice. This whole arrangement fugling sucks. Let me me out of the house and I’ll make my own damned money.
“In other words, widespread loan defaults could easily wipe out the Fed’s capital”
The FED has no capital, they are the bank of last resort, their checkbook never runs out because they’ve been granted the right to backstop commercial banks with the facility to print money as needed.
Who is simon black and why doesn’t he know this?
Of course the money didn’t last long…especially when you pay the CEO’s salaries and bonuses out of it first
Wake me up when they storm the Hamptons’…. Will it be televised as the f@ckers swing from the lamp posts?
The desperate acts of a dying government. Like a person maxing out credit cards before they die.
Someone we know said when people lose everything they lose it.
When the Soviet Union crashed people didn’t lose it. They were used to living under communism with nothing for 70 years.
Now the US economy is crashing and soon the local governments will be crashing in the economy’s wake. Am waiting to see how the american people will respond to this.
The US is a different system.