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How to weaponize the coming economic slump against the oligarchs [1]
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Date: 2025-03-16
The corruption of Chuck Schumer is evidence of serious distress on Wall Street.
A 25% collapse in the stock market would be evidence of the beginning of a debt deflation, such as occurred in 2008-09.
This is a corollary to the CR cloture vote. The alternatives are both bad. But one of them leads to relief from rule by the rich.
I am imagining Chuck Schumer got a call from one of his constituents and made a choice — between his colleagues and rank-and-file Democrats on one hand and Wall Street on the other. His choice, I am suggesting, not to shut the government down was not for the little guys, but for the big guys. To me, it suggests that rule by the rich does not exclusively run through the Republican party. It is also evidence that the oligarchy is concerned enough about the upcoming economic slump to let Chuck do a pratfall on the big stage.
Whether or not you follow my dark view, it is possible to assist the coming downturn in delivering pain to the oligarchs. A feasible strategy for progressives is to target the debt vulnerability of our corporate rulers, let them fail financially, and just make sure not bail them out this time. To be clear from the outset, this scenario will probably play out absent encouragement. Much as the Covid Collapse was more a function of Trump’s bungling than the virus itself, the 2025 recession results from the shock of an attempted autocratic takeover of the US government, which is just the most prominent feature in a panorama of chaos, incompetence and corruption around us every day.
While the internal logic favors a deep recession, below are a few considerations about how the economic damage can be isolated to a degree to the oligarchs by individual or collective financial choices. While that is all very interesting, I hope, the key act is the final act. When an economic collapse occurs, there can be no dramatic bailouts as in 2008-09. When they fail, that scene must be the same in which they are reduced to rational size, made to bear their share of the burden, or reined in, however you want to put it.
However speculative you may see this treatment, remember it as we go forward. At a minimum, thinking in these terms is important to understand the road ahead. First, a couple of facts.
Corporate indebtedness is high.
The graph shows the debt levels of households (blue), non-financial corporations (red dash) and federal debt held by the public (green broken; excludes debt held by trust funds and other government). The big bulge of mortgage debt is obvious hovering over the GFC and Great Recession. Clearly household debt has declined, even if student loans, credit cards, mortgages and other sources of debt are still primary stressors on households.
Household, corporate and federal debt as a percentage of GDP
The federal debt spiked as a clear consequence of the GFC with its bailouts, and then spiked again with the Covid Collapse. Federal debt will undoubtedly spike yet again from the incompetence and corruption of the Trump GOP.
The corporate debt line, you will notice, was once well below household debt, 20% of GDP below as recently as 2011. The differential flipped to 10% of GDP in the other direction only ten years later, and is roughly 5% above household debt today.
Another fun fact: The Fed has on its balance sheet $6.7 trillion which can legitimately be characterized as the cumulative bailouts to date.
Hard to believe. That’s with a “T”. Here’s the link.
Heck, here’s the chart:
Trillions with a T, Fed bailout culture, not approved by any elected official.
I will just leave that there.
The anecdotal signs of debt stress in corporate America are not hard to find. Commercial real estate is over-extended, for example. The sector took a huge hit from Covid, and has not recovered. Zombie loans are not uncommon. Here in Seattle, the all-time big builder Martin Selig is afloat for no other reason than his creditors don’t want the hassle of managing his buildings or the embarrassment of marking them to market value. Then, the anecdote of the moment, of course, Chuck Schumer — the Senate Minority Leader — torpedoed the will of his party, for some reason. Private debt at 160% of GDP is arguably 60% too high.
How progressives use the current economic slump, the over-indebtedness of corporations and their own financial choices to good effect
Curiously, almost poetically, the strategy that most affects the oligarchs is the same strategy as saves the planet. Sustainable economics. Buying local and small, even at a higher price. Starving the corporate monsters that dominate retail sales, including on-line sales. Amazon, Walmart, Kroger, etc.
As the economy begins to fail, the big players will need to shrink their margins to maintain sales. The lower income levels will be forced to find these lower prices, but many of us can choose to shop and spend elsewhere.
It is almost certain that folks are cancelling vacations (esp. those involving air travel), postponing purchases of ‘consumer durables’ like appliances, electronics, cars, furniture, big boy toys (esp. with tariffs in play). They are doing this for no other reason than prudence. One thing about an attempted takeover of your government, it is destabilizing and creates uncertainty, at which time the prudent thing to do is be conservative in spending. This is one of the key vectors forcing the economy into a downturn. Then there are the impacts of actual firings, disruptions of services, and tariffs.
I am suggesting that if a consumer were to use some of the unspent money to shift away from corporations to local or small-scale suppliers, this nudge might be extremely impactful on the consumer capitalists, because it hits exactly when their debt exposure is greatest. Natural demand will be slumping and they will need to shrink their margins, thus the revenue available for debt servicing.
The other bastion of oligarchs is Big Money, operations with access to capital who can borrow and buy up stuff, think farmland, then charge the highest rents possible.
“Rents” is not only the word for the payments to your landlords at the end of the month, it is an economic term of art designating returns got not by producing or selling, but by owning (obviously, see apartments), but also by controlling markets. In the hypothetical competitive situation, rents are competed away. By monopoly or other control, the real world has lots of rents, and it’s the main way the rich get richer for just having money.
Grocery chains can merge, for example, always with a flurry of debt, and because there is no good alternative for consumers, the new entity can charge a higher price from their monopoly position. That higher price is the rent. Big Oil flourishes by its control of the resource, not its efficiency or value. Oil and gas prices bear only passing resemblance to cost of production. Supply is manipulated to effect the price that produces the biggest profit.
If consumers can find alternatives to paying those rents – even if it is paying a higher price to a local or small-scale operation or a distributor like Costco or Trader Joe’s, the rents can shrink, again at the time of maximum debt exposure.
Yes, it is a given, as the economy tanks, unemployment rises and interest rates tend to drop. Sometimes they don’t, since the Fed focuses on inflation, and with tariffs and potential higher prices from the chilling of the farm labor market, prices could increase. If they fall, as will be demanded by any serious recession, this is good news for homeowners who can benefit from refinancing. It is again a place pressure can be brought to bear.
If we can restrain ourselves from pushing our new consumption dollars back into the corporate sector, the benefit of that demand will not reach the oligarchs. [Yes, the big guys’ loans can also be refinanced, cutting their cost of carrying debt, but it does not eliminate it — any more than your mortgage payment is going to zero with a dip in rates.] At some point, the moneyed class will be forced to begin to sell assets to meet loan payments. At this point there is the likelihood of a self-reinforcing debt deflation cycle, such as happened in 2008 with the GFC, leaving the financial sector flat.
Not a happy outcome, true, but a serious blow directly to the forces that need to be defeated. For the society at large, there is also a proven recovery plan at hand if we can get to it. By this, I am not referring to the mega-bailouts that failed so well after the GFC (and which, in fact, encouraged the oligarchs to focus on control of the government as a profit center). The proven recovery plan is Bidenomics.
Remember, it was less than two months ago that the economy was humming, employment was high, prices were stable and coming down. It will be years, under the best circumstances, before we get back there. But also In reserve, as supports to Bidenomics, are programs like the Green New Deal and Medicare for All that can provide immediate (very) productive employment and cost savings without inordinately rewarding bigness. These programs may be within reach to a progressive backlash to Trumpcession.
Most importantly, the No More Bailouts Plan is a way of reducing the oligarchy to rational size. We can even admit that they are too big to fail, but choose the alternative this time of just taking them over, whatever size they are, in proportion to the support they need, nationalize some, or just require ownership stakes for the funds they need to continue in operation. Voting shares. The end game cannot be a redux of the rich getting richer for screwing up the economy, as it was after 2009. No more bailouts.
Six Point Seven Trillion Dollars
In my opinion, we should also look at the Fed’s $6.7 trillion as a source of financing for public services and even reparations to victims of the oligarchy. Rule by the rich is not popular except among the rich (and I suppose among certain fascists who the rich think they control). The Tea Party element of MAGA needs to be challenged to look directly at how Trump is betraying his brand. Under Trump, the gummint and the oligarchs are joined at the hip. The blue collar billionaire is shilling for Elon Musk.
As a necessary digression, the grotesque income and wealth disparity of the United States today, in the current oligarchy, is an extreme outlier to other advanced economies. Such income disparity correlates directly to all sorts of societal disease, from obesity to mental heal problems, addiction, and on and on in a list too long to put here. Find the details in Wilkinson and Pickett’s book SPIRIT LEVEL. These two epidemiologists (not economists) lay out the direct connection between income disparity and societal ills, comparing across nations for which there is data, then confirming the correlations by cross-checking across the US states. Their work continues in the UK with Equality Trust.
End of Digression.
Beginning of Summary.
The giants of consumer capitalism and the corporate machines which profit from non-productive rents (i.e., leeches) depend on debt. They were over-extended already out of Covid. Another slump will put more stress on them. They can be squeezed even further simply by prudent spending, sustainable economics, and targeted support of smaller operations. It is not a matter of coordinating nationwide mass boycott by consumers worried about oligarchy, climate and sustainability (though that would help, too).
Each prudent choice in spending is a targeted hit, however small, to a key vulnerability of the oligarchs — their debt exposure. It is a step closer to the part of economic cycle that is triggered when assets must be sold to make interest payments. A serious bear market, such as a drop of 25% in the Dow, would signal that this part of the cycle is upon us. Stocks are liquid assets. Attempting to sell fixed assets would likely be very costly. At all events, the mistake of 2009, bailing out the rich, must not be repeated.
Caveat: Such stressful times for corporate America also strengthen the hand of corrupt government leaders, who may be inclined to enact further bailouts for a piece of the action. The oligarchs will not go quietly. Expect hysteria and threats and visions of catastrophe if we abandon them.
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