The COVID corporate bailout nobody is talking about
The real cause of the current recession and inflation
I rarely ask my readers to share the pieces I write, but I really hope you share this one so more people understand an aspect of the current financial crisis nobody is talking about. It’s true that inflation and gas prices are extremely high, but so much more going on. I’m learning more about friends getting laid off, people having their retirement funds demolished, and few people know about the cause of this.
There was a massive corporate bailout that you need to know about. It’ll help you better understand why everything’s costing you more money, why your job may not be secure, and why this matters when it’s time to go out and vote.
I actually saw this bailout kind of mentioned recently, but it wasn’t the focus of the story that went viral. A few weeks ago, Krystal Ball from the independent news channel Breaking Points on YouTube went on Real Time with Bill Maher. She managed to make Bill Maher look really dumb while discussing inflation because he had no clue about the corporate bailout that happened in 2020 at the start of COVID. Best case, he just didn’t remember.
The focus of this story was more “Krystal Ball DESTROYS Bill Maher” or “Krystal Ball makes Bill Maher look STUPID”. But everyone just glossed right over the fact that she brought up this massive corporate bailout.
If I’m being honest, I think most people don’t know about this. It’s not just Bill Maher.
Before we get started, it’s important to note that I’m not an economist. Econ was actually my least favorite class during my one semester of college. Now, I read a ton of books about the economy, capitalism, the stock market, and other aspects of the financial world.
The economy, like many other aspects of life and the world, is complex. You can’t point to just one single thing. So, I’m going to do my best to break this down based on what I’ve learned as well as my personal experience. If you want to learn more about this stuff, I recently learned about Economics Professor, author, and badass Richard Wolff. I highly recommend his collection of essays discussing the economy and COVID The Sickness is the System: When Capitalism Fails to Save Us from Pandemics or Itself. He’s honestly one of my new favorite people.
Now, let’s discuss the massive corporate bailout that happened as a result of 2019 and actually had nothing to do with the pandemic. It was irresponsible, and we’re seeing a repeat of the 2008 financial crash that screwed most Americans.
A series of random events
First, I need to tell you a story because it’s extremely important. A series of events happened to me by complete chance (and my constant curiosity), and it’s the only reason I stumbled across all of this information. This is something key to highlight because I think it exemplifies why so many people don’t know about this. Had this series of events happened, I’d be just as in the dark since nobody is discussing this.
For years now, I’ve been a major critic of capitalism. I see it’s benefits and think it’s one of the best options out there, but our current system is completely broken. Some people like Robert Reich think we can fix it, and he explains this in his books like The System: Who Rigged It, How We Fix It, which I highly recommend. Others, like Bernie Sanders think we need to move more towards a social democracy, which still has aspects of capitalism but balances the playing field a bit more.
Personally, I’m more in line with the Bernie Sanders line of thinking, but I think Robert Reich’s solutions are more realistic.
At some point, I’ll write a series explaining how I became such a hater of our capitalist system. I’ve actually been considering writing a short book about it because we often talk about how people get sucked into right-wing politics, but there aren’t many stories of people like myself. It feels dirty even making this equivalence because when we discuss someone getting pulled further in a political direction, we usually think of the alt-right. But don’t worry, even though I’m not a fan of fascism like most people, I’m not joining Antifa anytime soon.
Because of my dislike of capitalism and how it’s made me not trust anyone with money and power, I found myself in a strange position in early 2021 a few months after my grandpa passed away.
My grandpa always lived modestly, but I always heard rumblings that he was sitting on a lot of money. When he passed away in 2020, I learned that he left his kids a significant amount of money. How’d he make this money? He started investing in stocks decades ago. He kept buying and never sold, and it turned into a lot of money.
Without getting into too many details, my family is a hot mess. My grandpa didn’t actually leave me or my sister anything. We’re his only two grandkids, but he only left money for his children. My mom took a pretty big chunk of her inheritance and gave it to my sister, her two children, my son, and myself.
I’ve never had that much money in my life, and it scared the hell out of me. For my entire life, I’ve been financially illiterate and not that responsible with money. I saw this as an opportunity to change things, and that’s exactly what I did.
After learning how my grandpa made his money, I decided that’s exactly what I was going to do. I started buying every book I could get my hands on about the stock market, and I bought quite a few books about personal finance as well. I’ve probably read at least 100 books now on these topics.
Let’s recap the events real quick:
Like many Americans, I’ve been screwed by people with money and power for most of my life
This led me to becoming extremely skeptical of capitalism
For some reason that I still don’t fully understand, I’m an extremely curious person who loves to learn
I read a lot of books by people like Robert Reich and others explaining the issues with capitalism to better understand why the system is broken
I became a big fan of Bernie Sanders and his ideas around 2016
My grandpa passed away in late 2020
Because my grandpa invested, and my mom is cool, I got a significant inheritance in early 2021 (one year into the pandemic)
Since I spent most of my life financially stupid and irresponsible, I read a ton of books about being smart with money
As a byproduct of this, I better understood the issues about the system
I can’t express how important I think it is to lay this all out because the world and outcomes is mainly about luck. One of my favorite books is Success and Luck: Good Fortune and the Myth of Meritocracy by Robert Frank, and it reminds me to stay humble about where I’m at in life. My drug addiction should have killed me in 2012, but due to factors outside of my control, I was able to get and stay sober. Now I live an amazing life and am able to be a father to my son.
Yes, I had to take action when luck presented me with opportunities, but many people don’t get these same opportunities. So, remember this the next time someone’s trying to sell you the story that rich people just worked harder and that we shouldn’t help the less fortunate.
Especially because you’re soon going to learn about good ol’ corporate socialism.
“WTF is going on with the stock market?”
Alright, so I’m sitting on a bunch of money and have been reading a ton of books about the stock market. Now it’s time to invest.
A lot of people are afraid to learn about the stock market, and you shoudn’t be. But for those of you who are unfamiliar, I’m going to explain a few basics that you probably know intuitively anyways.
Buy low sell high - This is the first rule of investing. It’s one of those “duh” things, but you’d be surprised how many people sell when the stock market is at it’s lowest (like people are doing right now). We’re irrational creatures, and I actually just had to talk a friend out of selling and losing thousands of dollars.
Buy good companies and stay away from bad ones - There’s a lot of complicated financial stuff with companies that hardcore investors look at. Every quarter, publicly traded companies have to report earnings. Before they go public, they also have to write a huge report with really detailed financials. This gets ridiculously complicated, but there are people who break this stuff down so you can understand which companies are making a decent profit, which ones aren’t making money, and which ones have way too much debt.
When the world goes to shit, the stock market collapses - This doesn’t need an explanation. It’s obvious, right? Well, lock it into your brain because shit is about to get really weird.
Alright. We’re all on the same page, right? Good.
So, I’m sitting here in early 2021 with a bunch of money, and I’m ready to invest. I decide I’m going to take 70-80% of my money and invest it in S&P 500 index funds. This is the safest thing you can do next to investing in government bonds. Index investing doesn’t make you as much money as when you get lucky by investing in some individual company that takes off (and if this sounds like gambling, it’s because it is despite what rich people try to tell you).
I wrote about why I’m not worried about the current stock market crash recently for Business Insider. Basically, unless the United States completely collapses, I’m fine as long as I don’t die within the next 20-30 years. And if I do, at least my son will get a ton of money.
For my son, I invested 100% of his money in index funds, and it’s going to be his college fund. My dad also had me start investing for him, and I did the same. I’m not a douche, so I’m not going to gamble with their money. An annual return of 10% on your investment is more than enough, and that’s what the S&P 500 does.
As for my other 20-30%, I decided to invest in some individual stocks and crypto. I’m fairly young in the grand scheme of things, so if I lost it all, it doesn’t matter all that much.
I learned about how a relative made a ton of money because they invested in Tesla a long time ago. And in early 2021, Tesla stock was killing it.
Here’s what Tesla stock looked like from the time it went public to the end of 2020.
Do you see that? This company used to be less than $4 per share. By December 31, 2020, it was worth $705. To put that into perspective, if you bought 1,000 shares of Tesla in 2010 for $4,000, it’d be worth $705,000. Tesla made a lot of people rich, and that relative turned into a millionaire.
The timing of my learning this information couldn’t have been worse. I had been reading books, but I was still new to all of this. Remember the whole buy low and sell high thing? Well, the problem is you never know when the high (or low) is when you’re in the middle of it.
I bought a few shares, and I still don’t think it was a bad investment, but there was definitely a red flag that made me curious.
It was early 2021. We were a year into the pandemic, and the vaccine was just starting to be made public. Everything was still shut down, which meant a lot of people weren’t driving. So, if that’s the case, why the hell was Tesla stock up so damn much?
I moved to the second basic and asked, “What’s Tesla’s financial situation like?” I did some research, and they were making money. The fact that their profits were good indicated that it wasn’t some weird bubble. This helped me feel alright about my investment.
I had more money to invest, so I started researching other companies. I started looking at the stock price history of a ton of different companies, and all of them were the same.
A friend suggested that I invest in companies that I think will be around in 10 years when buying individual stocks. This is where I ran into an ethical dilemma. I know most corporations are run by some of the worst people on Earth who exploit workers as well as the system.
I made the personal decision to make smart investments while also keeping my moral compass in mind, but it wasn’t my top priority. I figured that although I have issues with capitalism, it doesn’t do me any good to go broke. Once I make some money, I can sell and invest in more ethical companies. This is how I squared it in my mind, and maybe I’ll write more about that at a later date.
So, what’re some companies that will be around in 10 years? I made a list and decided to look at their 5-year stock price history. If they’ve been getting decent returns, I’d invest in them.
This is when my alarm bells started going off like crazy. Let’s take a look at some of these companies and where they ended in 2020 at the end of the first year of the pandemic. The end of the year where the entire world was still completely fucked.
Mircosoft stock:
Google stock:
Walmart stock:
Target stock:
Apple stock:
Amazon stock:
I looked at all of these and asked, “Wtf is going on with the stock market?”.
This made absolutely 0 sense. Although I told you to lock it in, here’s a stock basic refresher:
When the world goes to shit, the stock market collapses.
We’re in the middle of a global pandemic. Why the hell is every single stock price I’m looking at so high? Not only are they high, they’re at their all-time highs. You need to understand how crazy that is. At best these companies should be maintaining a steady stock price and barely surviving. And these aren’t even all of the companies I looked at. There were so many companies like this.
Now, you’re probably looking at these and thinking, “Well, Chris, these are tech companies. Tech companies wouldn’t be too affected by the pandemic.” Well, that’s why I purposely tossed in Walmart and Target. But still, it doesn’t make sense.
Let’s use Amazon as an example because it’s the most obvious company that would make money in the pandemic. At-home deliveries exploded during the pandemic. But don’t forget how many people lost their jobs during the pandemic, which means we weren’t spending as much. Amazon was still making a profit, but it wasn’t nearly as much because a lot of people couldn’t afford it.
I don’t know if you remember, but there were a ton of stories during the pandemic about food shelters and other volunteer places delivering groceries and stuff because so many people couldn’t afford to eat.
Socialism, but much, much worse
What we all need to understand is that companies and the rich have been lying to all of us because they have the perfect cover. First, they were able to use COVID as a cover, and now they’re using the war with Russia and Ukraine.
You know what it’s kind of like? It’s like Die Hard 3. The villain and his crew have been doing all of these bombings in New York. For the last big act of terror, they say that there’s a gigantic bomb in one of the public schools. While everyone’s panicking throughout the city and schools are being evacuated, the villains use it as a cover to do a major bank robbery.
Yes, I know that was a sick movie reference. No need to tell me.
At the end of 2019 before the pandemic, corporate debt had reached astronomical heights. Corporations had almost $10 trillion in debt. To put that into perspective, that’s roughly half the US GDP.
Corporations gained all this debt through “junk bonds”. What happens is that during a recession, these loans go into default because companies can’t make their payments.
In November of 2019 before the pandemic, the US Federal Reserve said this in their Financial Stability Report:
“Balance sheet leverage of businesses is near its highest level over the past two decades.”
What that means is for years prior to the pandemic, companies were borrowing insane amounts of money.
Before we move on, play out in your head what would happen to you if you took out way too many loans that you weren’t sure you could pay back. What would happen to you, personally, when you couldn’t pay them back?
The reason companies were taking out so many loans goes back to our last major recession in 2008. The Federal Reserve has kept their interest rates ridiculously low since for over a decade, which made it so banks were lending money all willy-nilly. The Federal Reserve does this to lift us out of a recession, but they did this for far too long for some reason.
What did the companies do with all of that money? Did they create better products for consumers? Did they use it to create more jobs? Did they start paying their employees a living wage? Did they provide better health insurance and retirement plans?
Of course not.
They used most of this money to fund corporate buybacks. Corporate buybacks cause stock prices to go way, way up.
Now, let’s pause again to discuss a problem with capitalism and competition.
Taking on all this debt and raising your stock price is extremely risky. But what do you do when your competitor is doing this and you’re not? You go out of business. So, in order to compete, you have to take the same risky action as your competitor due. Capitalism incentivizes this behavior.
There’s a great analogy people make about behaviors like this. When hockey helmets were first introduced for safety, it was optional. Nobody wore helmets because it gave non-helmet wearers a competitive advantage. People risked their personal health for competition.
With capitalism, they risk our health for competiton.
Once shit hit the fan, the Federal Reserve had to come back in, and the US Government started bailing out all of these companies who took out way too much debt. They actually released a list of all of the companies who took out massive loans from the Fed on June 10, 2020 in their report to congress. You can see it here.
The companies on the list will make your head explode. Here’s a quick list of huge companies and how much they borrowed:
Well, that’s strange. Why would companies like these need to borrow money? They’re some of the most profitable companies in the world.
Let’s pause again real quick. Now, not only do I want you to ask yourself what would happen if you, personally, took out way too much money in loans, but what if you didn’t even need it?
Think about what happens when the average person takes out way too much debt and then loses their income. What happens to them? Typically it’s bankruptcy and being absolutely fucked for the next 7-10 years.
Well, welcome to corporate socialism. This is socialism, but much worse.
Here’s how much money each of the companies had in the bank when they took out these loans. You’ll find the number in the far right column:
Now, here’s how much the US Government gave Americans with stimulus checks vs how much they gave to corporations to bail them out when the pandemic hit. This is why Bill Maher looked so stupid talking to Krystal Ball.
Also, if you want a much better explanation of what happened, go watch this video from YouTuber WolvesAndFinance. This is where I pulled all of these screen shots, and he links to all of the info in the description.
This massive bailout led to 2021 being one of the best years for the stock market in the last decade. The problem is that it was all bullshit. The money flowed in from the bailout and stock buybacks inflated stock prices. The value of stock prices did not reflect the actual profits of these companies.
Now, because of all of this, it’s a major factor in the current economic crisis and stock market crash. Not only are everyday investors losing their asses, but retirement funds are linked to the stock markets. While younger people have plenty of time for the market to bounce back, but older people are screwed.
Stop falling for the bullshit about socialism
First off, not many people are actually arguing for socialism. There’s a big difference between socialism and social democracy. Social democracy levels the playing field by giving people a fair shot and stops some of the shit these corporations are pulling.
I can go on all day about how we got to this place, but that’s for another day. So, I’ll put it simply:
Politicians let corporations and billionaires run wild → corporations make a shit ton of money → corporations give that money to politicians for campaigns and politicians also own stocks so they profit off it as well
It’s a sick and twisted cycle with zero incentive to help the average American.
Just look at all of the bullshit we’re being sold about changing the system to help American citizens.
“It raises taxes.”
Um, did you see the graph of stimulus money vs corporate bailout money? You’ve been sold the lie of trickle-down economics. Have you seen the corporate bail-out money “trickle down” to your broke ass? I sure as hell haven’t.
As it stands, our tax money is going to people making insanely risky bets. Would you rather that or people have healthcare? Our tax dollars go to the wrong places.
“It makes people irresponsible.”
This is the neoliberal bullshit that pisses me off so much. We’re sold the lie that helping people is just making them not be accountable for their bad financial decisions.
I just explained to you how these companies are allowed to do the dumbest and most irresponsible things with money. They continue to do it because there’s no reason to stop. They’re bailed out every single time. As a country, we’re enabling them.
This is why I told you to imagine what would happen if you made the same decisions. You’d be fucked. And if you didn’t learn from your mistakes, people would call you an idiot.
But we’re supposed to think these billionaires are geniuses just because the government keeps letting them do this like they’re spoiled rich kids?
“It makes people lazy.”
I’m not going to argue with you about this right now. But there’s zero evidence that helping people makes them lazy. The research shows people work more when they have a better social safety net. Probably because they aren’t fucking miserable because they’re struggling to pay the bills while working at their terrible job.
Also, what snapped me out of this was a crucial point, and I hope it snaps you out of it as well.
CEOs make 351 times more than the average worker. Do we really think they’re working 351 times harder than the average worker?
If that doesn’t click for you, you may be too far gone. People are working more hours than ever before. It’s virtually impossible to work 351 times harder. The average worker would have to work .06 hours per day for that to even come close to making sense.
Think about that the next time you see Elon Musk spending 8 hours shit posting on Twitter and see people defending why he deserves billions.
Think about that the next time you see Bezos flying his penis rocket into space while his warehouse workers are getting royally screwed.
Currently, the rich are exploiting the parts of socialism that you’ve been taught to fear. And it kills me that so many people fall for it. Right now, all of us are struggling financially. I’m legitimately concerned for so many people as I continue to hear stories about layoffs, people not being able to pay bills, and people not being able to afford the rising costs of rent.
Meanwhile, women are losing the right to their own bodies, the LGBTQ community is being called pedophiles, and they’re actively trying to remove discussions of racism.
We’re living in a dumpster, and it’s on fire. We’re making terrible decisions with our vote because we don’t realize just how fucked everything is.
On a daily basis, I see people defending billionaires and our politicians while their fellow Americans are struggling to survive. What’s worse is that I see people who I know are struggling defend these people as well.
We need to stop defending the people who don’t care about us and work together to make a change.
I’m flabbergasted that nobody talks about this story of the corporate bailouts, and I’m even more bummed that a lot of people don’t even know about it.
I work my ass off in this capitalist system just to survive. I work full time, and I have like five side hustles. Fortunately, I’m a crazy person who loves to work, but do we want to have to live in a world where people have to do that just to survive? And do we want to do that while the people who need the least amount of help get it while everyone else suffers? I sure as hell don’t.
I’m hopeful, and I’ll keep trying to educate people on this stuff because it’s a lot to learn and figure out. So, if there’s anything you want me to discuss or cover, let me know in the comments.
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