Congress, this message is for you. Photo: Alexi Rosenfeld/Getty Images Capitalist economies run on faith in the future .
Of course, that public-health shock gutted faith in the future in short order. And a credit crunch duly emerged in March as investors in corporate bonds fled to cash.
This state of affairs represents a remarkable achievement for the Federal Reserve. Although the central bank’s heavy-handed interventions may perturb those who harbor a childish belief in the “invisible hand” — and irk those who justifiably resent corporate America’s exemption from the nation’s collective suffering — those interventions were surely preferable to inaction.
Recessions have an innate tendency to foster corporate consolidation and inequality. When business conditions are bad, investors will seek safety, choking off credit to small, unproven firms and providing it to large, cash-rich ones. Meanwhile, corporate titans have the reserves to weather a long storm; small enterprises typically don’t. And when the latter fail en masse, the big boys can scoop up their capital and real estate at a steep discount, and then cash in when the recovery arrives.
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