Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

We Can’t Wait Any Longer for More Coronavirus Relief

Economics / Coronavirus Depression Dec 11, 2020 - 05:11 PM GMT

By: John_Mauldin

Economics

The Federal Reserve acted quickly last March, cutting rates and launching a massive asset purchase program. Congress helped with a giant fiscal aid package.

Together, these jolted the economy back to life. The jolt wasn’t permanent, however.

The economic patient is now wavering again. This time, despite pleas from Fed Chairman Jerome Powell that monetary policy has reached its limits, the fiscal part of the cure is not forthcoming.

Ah, but “limits” don’t really apply to central bankers. Not the central bank of the world’s largest economy and issuer of the global reserve currency.


The Fed has constraints—some practical, some legal—but is highly creative in overcoming both. Powell repeated this quite clearly just last month.

Speaking to a San Francisco business group on November 17, he said, “The Fed will stay here and be strongly committed to using all of our tools to support the recovery for as long as it takes until the job is well and truly done.”

  • This was not the usual equivocating Fedspeak.

Powell promised to use all the Fed’s tools, for as long as it takes, until they are well and truly done.

No mention of any limits.

  • Powell isn’t one to make promises he doesn’t plan to keep.

So if the economy begins slipping into a double-dip recession, I believe he will open the spigot again. What the barrage will look like, I don’t know, but it is probably coming.

A quick note on all the angst surrounding Treasury Secretary Steve Mnuchin taking back some of the Federal Reserve’s CARES Act funding. First, the Fed used a little bit in the beginning, but much of that money was just sitting there.

My sources say Mnuchin is looking for a way to make a deal with Democrats more palatable to Republican senators. Recovering unused Fed money gives him almost $500 billion to soften their frustration with the price tag.

The Senate seems to want a number below $1 trillion.

  • With the recovered money, they could pass a “new bill” for less than $1 trillion, while actually spending more.

Whoever you blame for the deadlock, the simple fact is a bill needs to pass soon. I believe there is a serious risk of a double-dip recession without some major unemployment funding.

We have about reached the limits of jobs recovery absent a vaccine. That leaves us with a real-world unemployment rate higher than the Great Recession’s worst.

  • Waiting until February to pass a stimulus bill simply tempts the recession gods to strike again.

I wish they would just get a bill done. Forget about waiting for the Georgia elections; if Democrats take the Senate, they can pass a bigger bill later.

The US has done nowhere near what the largest developed world economies have done relative to their GDP. From Grant Williams’ latest letter:


Source: TTMYGH

Further, when you combine all the stimulus from around the world, it is a rather staggering amount in both size and variety. The Western European countries alone have provided 30 times more stimulus (in current dollars) than the Marshall plan after World War II.


Source: TTMYGH

Total global debt will be close to $300 trillion by the end of the first quarter 2021, and global GDP will have been decimated. Every major central bank, not just the Fed, has opened the monetary spigots. It is no wonder the market is levitating.

  • Unlike 2008, this crisis has an identifiable end point.

That is, if the new vaccines work as well as expected and are distributed in the next few months.

I worry more about the damage already done. Many of those lost jobs aren’t coming back. Millions of small businesses will never reopen.

Other new businesses will open, but that will take time and probably an effective, widely distributed vaccine. Some property owners will never again collect the kind of rent they used to.

All that adds up, and it will take a long time to repair and adjust to. Once we do, we’ll still have the preexisting debt and other problems.

But, this being the season when we give thanks, let’s also remember the good news. The crash efforts to develop COVID-19 treatments and vaccines are about to bear other fruit in the form of some amazing new biotechnologies. This is going to pull a lot of new health and medical technology forward from the future.

Change is happening swiftly and not always comfortably. Events that would have stretched over years seem to be happening all at once, which makes it a little unsettling.

I firmly believe we’re going to get through this and find a better world on the other side. And a relief package for those who help us get there is a good next step.

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

© 2005-2022 http://www.MarketOracle.co.uk - 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