Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
How Stagflation Effects Stocks - 5th Dec 21
Bitcoin FLASH CRASH! Cryptos Blood Bath as Exchanges Run Stops, An Early Christmas Present for Some? - 5th Dec 21
TESCO Pre Omicron Panic Christmas Decorations Festive Shop 2021 - 5th Dec 21
Dow Stock Market Trend Forecast Into Mid 2022 - 4th Dec 21
INVESTING LESSON - Give your Portfolio Some Breathing Space - 4th Dec 21
Don’t Get Yourself Into a Bull Trap With Gold - 4th Dec 21
4 Tips To Help You Take Better Care Of Your Personal Finances- 4th Dec 21
What Is A Golden Cross Pattern In Trading? - 4th Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - Part 2 - 3rd Dec 21
Stock Market Major Turning Point Taking Place - 3rd Dec 21
The Masters of the Universe and Gold - 3rd Dec 21
This simple Stock Market mindset shift could help you make millions - 3rd Dec 21
Will the Glasgow Summit (COP26) Affect Energy Prices? - 3rd Dec 21
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock - 1st Dec 21
Stock Market Sentiment Speaks: I Fear For Retirees For The Next 20 Years - 1st Dec 21 t
Will the Anointed Finanical Experts Get It Wrong Again? - 1st Dec 21
Main Differences Between the UK and Canadian Gaming Markets - 1st Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - 30th Nov 21
Omicron Covid Wave 4 Impact on Financial Markets - 30th Nov 21
Can You Hear It? That’s the Crowd Booing Gold’s Downturn - 30th Nov 21
Economic and Market Impacts of Omicron Strain Covid 4th Wave - 30th Nov 21
Stock Market Historical Trends Suggest A Strengthening Bullish Trend In December - 30th Nov 21
Crypto Market Analysis: What Trading Will Look Like in 2022 for Novice and Veteran Traders? - 30th Nov 21
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The Great Coronavirus Depression - Things Are Going to Change. Here’s What We Should Do

Economics / Coronavirus Depression Mar 28, 2020 - 01:53 PM GMT

By: John_Mauldin


In the aftermath of the coronavirus, we face the strong possibility of a deflationary depression. We cannot allow that to happen.

This is going to mean significant amounts of government debt, and much of it will have to be monetized by the Federal Reserve. I fully get that means risking an inflationary episode as a result.

In order to get inflation, there has to be a big rise in demand along with a jump in the money supply.

We are going to see the money supply climb higher, yes. But we cannot be sure that we’ll see a concurrent spurt in demand growth that tops pre-virus crisis levels.

This crisis could emotionally scar a generation just as much as the Great Depression affected our grandparents and great-grandparents.

We were still recovering from the Great Recession just 10 years ago, and that makes us especially vulnerable.

Look at what happened in Japan after its economic bubble burst and recession hit in 1990. The country responded with massive monetary stimulus similar to what the U.S. is considering now. Even that did not result in inflation in Japan.

The Japanese became savers. It literally changed their habits.

Other habits are serving them well during this pandemic. Bowing is more customary than handshaking. Many wear masks during travel. And, for better or worse, their increasingly elderly population experiences isolation.

Japan’s 38 million people are doing their part to slow the coronavirus’ spread, perhaps without even trying. We could learn something from them.

There are ways to control an inflationary episode. There is damn little you can do with a deflationary depression. It will bring some changes.

First, our response to the virus crisis will change the way we structurally organize our business lives. Companies are learning that they can do more remote work. Employees will enjoy that. We may not need as much office space.

We are also going to realize that we might need less of certain things. Which means a lot of jobs that existed pre-crisis are simply not going to come back in any viable form, post-crisis.

The government cannot keep a small business going beyond a certain point. Pick a number. Three months? Six months? Many business owners and employees will be forced to figure out a Plan B and find something else to do.

Second, the U.S. ramped up for World War II. Then when the war was over, the soldiers came home and resumed their civilian lives. America cannot stay on a wartime footing for more than a few months after the crisis ends. No permanent government programs. Period. This is important.

Third, let’s assume we keep everybody afloat for six months, although I sincerely hope it is not that long. An extreme lockdown could mean a few months, not six months. What do we do after the virus is contained and we have vaccines?

If we are going to blow out the budget anyway, let’s sell a few trillion dollars of 100-year, 1% bonds and use all the proceeds on infrastructure projects over the next four years.

No techno wizardry like high-speed trains. Stick to the foundationals, like replacing our roads, bridges, water systems, and upgrading our electricity grid.

This may seem radical, but the world can absorb those bonds along with the other bonds we will need to sell.

The process will get a bit prickly, but we’ll figure it out. And we don’t have to issue the entire amount on day one. Rather, just as the money is needed, which reduces inflationary risk.

That will put people back to work—in particular, those people whose jobs are no longer viable. And we actually get something for all that money—revitalized infrastructure that will last for generations. Gods know we need to spend money on infrastructure. It is crumbling.

Fourth, I hate to say this. I truly do. But we may be in a period like at the end of WWII where the Fed controlled the entirety of the yield curve. Maybe this is the Great Reset 1.0, or a good practice round. Let’s do what we can and learn from it.

None of us wanted this crisis and it’s certainly not good. But we can take this lemon and make lemonade. Or at least we have the opportunity.

The Great Reset: The Collapse of the Biggest Bubble in History

New York Times best seller and renowned financial expert John Mauldin predicts an unprecedented financial crisis that could be triggered in the next five years. Most investors seem completely unaware of the relentless pressure that’s building right now. Learn more here.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

John Mauldin Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in