In this video, we are going to discuss the latest in US-China relations. We’ll tell you where US tax dollars have really been going, and what this means for the deepening domestic recession, which has pushed the US Treasury yield to all time lows while national debt climbs to new peaks.
The Paycheck Protection Program (PPP) was designed as an emergency measure to support small American businesses during the pandemic-induced economic collapse that has gripped the country this year. The program grants loans to vulnerable small or independent businesses, allowing them to keep their workers–many of whom are low income individuals that depend heavily on their salaries to stay afloat–employed and on payroll throughout months of lockdowns and store closures.
Hundreds of millions of US taxpayer dollars poured into the funding of the PPP. Of course, if this funding really was going towards the survival of America’s small businesses, it is surely a price that citizens would be happy to pay. But instead, $192 million to $419 million worth of these loans were handed out to over 125 Chinese-owned or invested companies that base their operations in the United States.
Among the beneficiaries were numerous enterprises owned by the Chinese government itself, including some that supported the country’s military development program as well as propaganda packed state media outlets. The loans were spread out among a variety of industries in which China competes directly with the United States, such as aerospace, pharmaceuticals, and semiconductor manufacturing.
These sectors have all been highlighted for accelerated development in Chinese plans to overtake the US as the world’s predominant superpower. By achieving dominance in such fields, China can beat out its competitors in the US and other countries.
Perhaps most concerning–and perplexing–of all, a few of the firms had even been flagged by the US government as national security threats. Such discoveries beg the question…why are valuable funds that could be going towards American businesses being spent in this way?
Consider that small businesses make up nearly half–44 percent–of all economic activity in the United States. Furthermore, small businesses are one of the largest sources for jobs in the US economy. The drastic number of closures we have seen in the last six months could have far reaching effects on the country’s economy, dragging growth to a standstill and deepening the recession long into the future. When small businesses shut down, unemployment and debt spike while cash flow stagnates, making recovery that much harder.
In fact, according to the July 2020 Small Business Coronavirus Impact Poll compiled by the US Chamber of Commerce, one in every five respondents were granted a PPP loan, and almost two thirds of those–64 percent–worried that they would not meet the necessary standards to qualify for loan forgiveness.
Meanwhile, while funding trickles into the pockets of Chinese affiliated businesses, the domestic economy has taken a turn for the worse. A new employment report is set to come out soon, and experts anticipate some disappointing numbers ahead. While jobs returned to the economy in droves in May and June, Wall Street economists say July statistics will drop off. This reflects a larger pattern in the US economy as any signs of recovery have stagnated amid rising case counts.
Morgan Stanley predicted that as few as 1 million private sector jobs could have returned last month, a sharp drop from the 7.5 million added in May and June. Since many emergency aid measures expired at the end of July, the continued lack of employment opportunities poses a serious risk to American individuals that are falling further and further behind on basic living expenses like rent payments.
The prolonged slump has also contributed to a spike in borrowing. The US Treasury Department recently reported that the rest of 2020 will see it borrow an additional $2 trillion in order to keep injecting capital into the collapsed economy.
Although the stock market has largely remained oblivious to the United States’ economic woes, Treasury yields are taking notice.
The five-year Treasury yield dropped to never before seen lows this week and the benchmark 10-year Treasury yield fell to its lowest point in 5 months. Both indicators show that bond investors are looking to put their money somewhere safe amidst renewed fears that the US economic recovery will be slow and painful.
That means there’s more economic pain ahead for all of us, and individuals and American businesses alike need to prepare for the worst.