A Tweet Thread by Michael Pettis explains.

  1. During my Sunday seminar a student made a presentation with preliminary data on how Covid-19 has affected the wealth and the income of different households in China, ranked by income. I sort of expected a broadly linear relationship in which the rich and very rich would have...
  2. ...been unaffected or slightly worse off, the middle worse off, and the poor a lot worse off. According to her data, however, the rich and very rich were actually better off in terms of both income and wealth (the latter, we think, mainly because they owned “better” real...
  3. ...estate), while the middle were worse off in both, and the poor were much worse off (in wealth mainly, we think, because of a depletion in savings). I expected Covid-19 to worsen income inequality, but I was surprised both by the extent to which it did and by the fact that...
  4. ...the wealthy actually continued advancing while only the middle and the poor were worse off – at least according to preliminary data. What happened in China won’t necessarily happen elsewhere, but, still, I suspect we will see similar patterns in other countries affected by...
  5. ...Covid-19. The net economic effect of the pandemic, in other words, is likely to be a very substantial transfer of wealth up the income scale. It seems to me that any fiscal or monetary response that doesn’t take this into consideration is likely to be ineffective and maybe...
  6. ...even harmful (if it worsens income inequality).

The US will see similar things but not to the same degree. 

Many successful US businesses had far too much leverage and will go under as the economic data has been nothing but grim.

  1. May 8: Over 20 Million Jobs Lost As Unemployment Rises Most In History
  2. May 15: Retail Sales Plunge Way More Than Expected
  3. May 15: Industrial Production Declines Most in 101 Years

Fed Promotes More Free Money

Things are so bad in the US, The Fed asked Congress to step in with fiscal recommendations, especially more deficit increasing measures.

I commented on May 14, Panic Sets In: Fed Promotes More Free Money.

The Fed wants the asset holders to be bailed out and the Fed will try, but the US rich "in general" will not as a class all do better.

Yet, I agree with this key statement: "The net economic effect of the pandemic, in other words, is likely to be a very substantial transfer of wealth up the income scale."

This material is based upon information that Sitka Pacific Capital Management considers reliable and endeavors to keep current, Sitka Pacific Capital Management does not assure that this material is accurate, current or complete, and it should not be relied upon as such.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!


Latest Forex Analysis

Editors’ Picks

When is Japan’s data-dump and how could it affect the USD/JPY?

While the risk catalysts have recently been lighter, mainly due to the equities’ upbeat performances, the underlying fears aren’t yet wiped out. Technically, buyers keep targeting the 108.05/10 area comprising multiple highs marked since April-19.

Read more

AUD/USD: Upside momentum again fizzles around 11-week top, still above 0.6600

Having marked yet another failure to stay strong beyond 0.6650, AUD/USD remains depressed around 0.6640/35 at the start of Friday’s Asian session.Risk-tone remains positive as equities cheer hopes of further stimulus, economic restart.

AUD/USD News

Goldman Sachs puts Bitcoin on par with Gold

One of the world's largest investment banks, Goldman Sachs, announced a conference for its clients entitled “Implications of Current Inflation, Gold and Bitcoin Policies”

Read more

Gold: Limited gains below the $1730/oz level for XAU/USD

After bouncing from the 1690/1700 price zone XAU/USD is stalling below the 1730 resistance and the 50 SMA on the four chart. The picture is mixed as it seems the metal is challenging a tough resistance near the 1730 level.

Gold News

WTI oil prices rally on gasoline demand and hopes of output cuts’ extension

WTI crude oil prices have appreciated more than 5% on Thursday to reach $34 and approach two-month highs. Investors' optimism about an increase of gasoline demand and speculation of an OPEC+ deal to extend output cuts are driving crude prices higher.

Oil News

Forex Majors

Cryptocurrencies

Signatures