The Mother Of All Bailouts – IMMINENT
Last week’s main conclusion is that the COVID-19 pandemic is the most economically disruptive black swan event in modern history. NAYSAYERS argue that the mortality rate is only at 1%, that they personally haven’t felt the impact of it on them yet, that the seasonal flu causes many more deaths, and that we should not be as alarmed as the media makes it seem.
We’re past all those logical points right now. Forget the comparisons to SARS, Swine Flu, Ebola and other pandemics. Forget the similarities with other black swan events of recent decades – the MARKETS have said their piece, which is that this is the MOST insane occurrence in modern economic history.
At this point, after the FED has made a 50bps emergency cut, after the IMF has intervened, after Congress has passed a relief package in the billions, and after the world’s most influential countries have coordinated a massive response strategy, it is clear that the PANIC hasn’t died down by even A LITTLE.
Children are talking about this. Adults can’t stop debating the matter. It has taken over all aspects of our daily lives and WREAKED HAVOC on the global stock and bond markets and exchanges.
The global sovereign bond yield has officially dropped to the lowest level in history. Large institutions, which need IMMEDIATE ACCESS to funds due to the possibility of massive client withdrawals, park their cash in the most LIQUID financial instruments: government bonds. This has driven the price up to its highest point in history. In turn, the YIELD is now the lowest IN HISTORY!
Fear levels are higher than in the depths of the Great Financial Crisis of 2008, worse than in the Lehman weekend, and they even resemble the emotional shock of NYC residents on the morning of 9/11.
The loss of equity in the past 9 days has now SURPASSED the equity wipeout of homeowners in 2008. Back then, prices collectively dropped by $8 trillion, while this one is already $9 trillion and COUNTING.
93% Of Investors Generate Annual Returns, Which Barely Beat Inflation.
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More alarming than anything else is that the FED’s emergency cut didn’t help in the slightest.
Check this out:
Lowering interest rates assists in keeping markets liquid, open, and functioning, but they do NOTHING to alleviate the authorities’ managerial capabilities in containing the virus or the private sector’s continued paralyzed state of idling. Events are being canceled, schools are being closed, workers are being sent home, and carriers are being quarantined – these don’t change with lower rates, zero rates, or NEGATIVE rates.
In fact, what central banks are doing is similar to what lousy parents do: break promises, miss big calls that expire worthless, and falsely keep reassuring the public.
The credibility of the central banks will reach a problematic juncture where congress will doubt and challenge their decision-making process and TRUMP will become even more aggressive with them. The markets are already catching the Federal Reserve in their bluff.
Wall Street is predicting that the FED will cut rates by an additional 50bps in the March meeting next week!
Doing that kind of cut will send the FED Funds Rate to 0.75%, eerily close to official ZIRP policy.
The FED might also consider the UNTHINKABLE and mimic the Japanese by expanding their purchases from bonds to stocks.
Let me repeat that: some voices on Wall Street have begun to mention the legal procedures that would be needed in order to allow the central bank to own American businesses.
To me, that would mark the end of capitalism as we know it.
At this point, you must realize the SEVERITY of the situation. The stock market has not behaved this way since the era between 1929 and 1933.
This was the period that brought about this country’s most controversial legislation and an ATTEMPTED COUP!
It also prompted the government to confiscate gold and devalue the dollar by 40%!
Governments Have Amassed ungodly Debt Piles and Have Promised Retirees Unreasonable Amounts of Entitlements, Not In Line with Income Tax Collections. The House of Cards Is Set To Be Worse than 2008! Rising Interest Rates Can Topple The Fiat Monetary Structure, Leaving Investors with Less Than Half of Their Equity Intact!
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