Fed/Government in Panic Mode

The Federal Reserve has now lowered interest rates to effectively zero. In other words, the financial system (big banks) or once again in deep doo doo. Sunday the Fed announced they would again expand its balance sheet by purchasing $500 billion in Treasuries and another $200 billion in mortgage backed securities. But that isn't enough. The government is planning to jump in as well. Even Mitt Romney is calling for the government to send $1,000 to every American adult. Multiply $1,000 by 200 million people and you now have a $200 billion addition to the deficit. On top of that, there is strong talk of eliminating the payroll tax. This is what passes for free-market conservatism now days (see link).

What we are entering is a tug-of-war between massive deflation and massive government/federal reserve intervention to stop it. Without intervention, the bubbles pop. Housing prices collapse, stock market collapses, 401K and pensions plans become insolvent, businesses layoff, income falls, consumption drops, etc. In other words, Great Depression 2.0.

But massive government intervention potentially results in dollar devaluation, total elimination of pricing what is true value, and possibly high inflation in places not desired.

So what's the solution? Is there one?

 

Is there any crappy little countries we can invade? That usually helps the economy. I say we invade Mexico, they have been invading us for years, time to repay.

 

What was that little place Reagan invaded when he needed cover for something? Is it still around?

 

I think it was purchased by some Liberal Billionaire for the purpose of having sex with kids.

 

If the Fed can print all the money they want why do we even need to pay taxes?

 

I have been asking that question for years. Another good question is, if the fed can print all the money they want, then do we really have a national debt?

 

Yes, it was ' Murica. He did it a couple times. The second time was outlandish:

Reagan carried 49 of the 50 states, becoming only the second presidential candidate to do so after Richard Nixon's victory in the 1972 presidential election. Mondale's only electoral votes came from the District of Columbia, which has always been considered a Democratic guarantee, and his home state of Minnesota—which he won by a mere 3761 votes, meaning Reagan came within 3800 votes of winning all fifty states. Reagan's 525 electoral votes (out of 538) is the highest total ever received by a presidential candidate. Mondale's 13 electoral votes is also the 2nd-fewest ever received by a second-place candidate, second only to Alf Landon's 8 in 1936.

 

Of course you guys are half joking about another invasion to crank up the war industry. But seriously, we already have 800 to 1000 overseas bases, are occupying Iraq in open defiance of their legislature, threatening countries from Venezuela to Germany with sanctions, increasing troop numbers in Africa, and so on. The current deficit was projected to be slightly over $1 trillion. Once all the intervention measures kick in, combined with a looming recession/depression, the deficit could easily approach $2 trillion.

Everything is under pressure. Right now many grocery related items are experience shortages due to panic induced demand increase. People are preparing for the virus as they would for a Cat 5 hurricane. But as the sickness spreads, shortages will result from supply decreases rather than demand increases. Workers will get sick, not report to work. Imports may cease, and trans-country truck delivery my diminish. On top of that, with oil dropping under $30/barrel, the already indebted oil industry is in big trouble. The politicians are panicking and perhaps all of us will be if what the politicians fear becomes reality.

 

I guess taxes aren't necessary so long as there is a demand for dollars which prevents the collapse of the currency. That demand for dollars is pinned on the deal with the Saudis and Arabs on oil sales being sold exclusively in dollars. Countries that import oil are forced to accumulate dollars in order to purchase oil. Then the Arabs exchange the dollars for US Treasuries, armaments, or invest in US assets of some sort.

But once the dollars-for-oil model ends, the dollar collapses. Hence the need for empire and control of the Middle East.

 

Welcome back. It's good to see your rosy outlook again.

 

All is well. Go shopping, buy stocks, thank the military for their service, vote for the selected senile puppet of your choice, and salute the flag.

 

For the record, I'm making a prediction. The Federal Reserve will purchase stocks outright if the stock market doesn't respond to stimulus ($1,000 checks to adults, suspension of payroll taxes etc.). If Congress is slow to enact these measures or if the markets accelerate downward before they can be enacted, the Fed will move ahead with stock purchases regardless of its mandate or legality.

 

The world is going to end because of a virus. What a bummer. At least I was at the Rose Bowl in 2006.

 

It won't end, but it will change. We will all have to adapt and the transition period is going to be pure hell for most of us.

 

I'm good, I have a bunker filled with Big Red and freeze dried Barbacoa. I'll see you guys in a few months.

And if any of you homos try and touch me, I'll kill ya.

 

Hope you have extra TP, Francis.

 

No problem I have extra tortillas.

Corn

 

Nice deflection. You have had lots of practice no doubt.

 

Frankly, this isn't a bad time for government to loosen credit. We're dealing with an economic mess, but it's a mess that's almost sure to be temporary. It seems fairly reasonable to keep cash flow and credit cheap until it blows over. The problem is that we've already needlessly loosened it, and we're already running a ridiculous deficit. We haven't left much room to loosen things. I don't see how cutting the payroll tax and doling out $1,000 to every adult does a hell of a lot.

I do think this is going to be a long term game changer in terms of public health and global trade and travel.

 

Could we invade Nigeria, get my inheritance I was promised, and take the rest of the gazillion dollars they have promised?

 

Shapiro is right. We've racked up a huge amount of debt without any justifiable cause (such as war, economic calamity, or infrastructure/capital projects), and it limits what we can do now.

 

Deflecting? Like deflecting a current problem with Mexico to a Presidency 40 years ago citing evidence such as “cover for something”? That kind of deflecting?

 

I wish DJT hadn't bullied the Fed over the last few years to keep the rate lower than it otherwise would have been. There would be more room to adjust.

 

There must have been some pent up DJTS for a poster who has been here since 2016 with less than 100 posts to get so triggered.

 

So exactly how would that have helped?

 

They could move it more and more often. Having it unnaturally lower than it otherwise would have been removes a lever.

 

https://nypost.com/2019/07/28/the-fed-is-courting-disaster-by-leaving-interest-rates-too-low/

I generally don't post links to the NY Post. But this is a quick/dirty "research".

 

Some Fed members worried that keeping rates low would encourage too much risk-taking, minutes show

I guess this whole thing removes the fear of deflation.

 

The low rate is not the problem. The underwriting was, and could be the problem again. Regardless, that has absolutely zero effect on the current situation. Not that I like more debt, but it’s ( the rates) not preventing any response right now.

 

I've been banging this drum for years. Decades actually.

Here's the oldest Hornfans link I can find. But it is a position I've believed in since I was in college 30-ish years ago.