Our “Big View” is scary: A “Synthetic Depression” is being rolled out. Not trying to make you paranoid, but we are following the data….
We think sometimes you don’t try to save all the financial Big Players, as the IMF planning to piss-away a Trillion Dollars which makes no sense. Unless, of course, you don’t believe in “free markets.,” Free when convenient, perhaps, boys? Also: Stories using the term “bazooka” related to stupidity like this, should be taken with sodium chloride. There’s a quadrillion of deriv atives to blow up – do the math. A Trillion is Kleenex money.
Now let’s move to a REAL look down the crapper. This is based on early futures (6 AM Central). And yes, looks near-enough lock-limit down, to us: 10% down today, maybe?
Markets in Europe are being hammered today, as well. The British market was down more than 6%, the German down more than 7% and France was sucking the big one falling
8.77% 10.72% at mid-session and to within spitting distance of a 9% 12% decline. So goes panic, huh?
Fed Panics to Zero
As we have been saying since January, any global pandemic is a great opportunity to reset financial markets. And, as you can read in the Fed “panic statement” from last night, the financial guys are doing just what we expect the Trump campaign will have to do in the fall: Issue mea culpa‘s and blame Left Field Events:
“The coronavirus outbreak has harmed communities and disrupted economic activity in many countries, including the United States. Global financial conditions have also been significantly affected. Available economic data show that the U.S. economy came into this challenging period on a strong footing. Information received since the Federal Open Market Committee met in January indicates that the labor market remained strong through February and economic activity rose at a moderate rate. Job gains have been solid, on average, in recent months, and the unemployment rate has remained low. Although household spending rose at a moderate pace, business fixed investment and exports remained weak. More recently, the energy sector has come under stress. On a 12?month basis, overall inflation and inflation for items other than food and energy are running below 2 percent. Market-based measures of inflation compensation have declined; survey-based measures of longer-term inflation expectations are little changed.
“Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The effects of the coronavirus will weigh on economic activity in the near term and pose risks to the economic outlook. In light of these developments, the Committee decided to lower the target range for the federal funds rate to 0 to 1/4 percent. The Committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals. This action will help support economic activity, strong labor market conditions, and inflation returning to the Committee’s symmetric 2 percent objective.
Even with the rally Friday, however, you can see in our comparison of the present market behaviors that we really are on a track that is eerily similar to how 1929 played out:
Still Replaying 1929
Front edge of the Second Depression, I’m afraid, by the look of it.
It’s bad and is on track to get much, much worse. In fact, in our work, there is a case to be argued that as far down as this morning’s opening will take us, we MAY only be less than halfway into this decline:
Put on your conspiracy hat, for a minute, and let’s look at the data.
The stock market hit its all-time high when? February 19th.
Yet, what else was going on – macro stuff most people don’t think about?
Well, for one, Donald Trump was yelling at the Fed to lower rates. Did he know something in advance? There was already action in the bond market that had players on edge. But above everything, there was The Big Ugly that no one was talking about (and still aren’t):
“What could possibly drive Global Growth after the Market Peak?”
Two metrics here: Velocity of Money at M2 was (and still is) cratering. As you can see in this chart from the St. Louis Fed, money has never been “turning over” so slowly. 1.425 is the lowest velocity has EVER been – including in the Great Depression!
While – on a “normal” or “sane” planet, huge government debt – far in excess of current income would set off runaway inflation, we have gone down the same economic path that Robert Mugabe took Zimbabwe down with “Modern Monetary Theory.” The problem is, when MMT blows up, you end up with hyperinflation. So a reasonable fear runs off in that direction. Gold bugs may get a laugh yet – it any survive.
But, like Zimbabwe, Venezuela, and other failed socialist governmental models, the death-knell of MMT is the problem of convertibility. In other words, does the “paper” stand for “good delivery?”
Don’t know if you have priced toilet paper of masks lately, but there’s a case this could turn into the leading edge of hnyperinflation and if so, it will spread to food and all other commodities. If you need it, watch prices closely.
The MainStream is already hinting that this is in the wings.
The Washington Post sundicate ran the story this weekend telling us where to look: “Companies that feed America brace for labor shortages amid worry about restocking stores.” You remember how supply and demand work, of course? Scarcity drives prices higher…
Second Macro Problem: Then there’s the problem with underlying debasement of the Nation’s money. A constitutional arguement could be made that the Congress in 1913 acted illegally ceding creation of money to the (non) Federal Reserve. (I happen to agree, but that horse left the barn long before I was born and that was 71-years ago…)
What we are in now is the workout explained in a paper of collegue of mine and I worked up in 2001: Essentially, we posited that a nation’s currency could NOT be infinitely watered down (and loaded with debt) because at some point, people would lose faith in it. The Stand for Delivery problem and compounding of debt.
To be sure,, the whole Bitcoin and crypto madness has been a useful indicator of collapse. I told you in 2019 that BTC would blast down to under $4,000 (my consigliere figures under $2,000) because it reveals how much of “the happy-talk” people are willing to swallow.
The answer this morning is $4,555…and falling.
The Global Financial Criminals would look at their $250-billion crypto swindle, they’d look at the cratering of economic turnover, they’d consider the lack of demand to drive growth, and they would consider the long-term implicates of loading “money” down with “debt.”
You likely don’t run the numbers (this is what Peoplenomics is all about…keeping ahead of the curve on this stuff) but as our readers know, the item that cost one dollar in 1913 cost $25.88 in 2019. So with 2% inflation, we could round it to costing about $26.40 today.
People tend to forget math – to use the numbers to gain perspective. But what happens wehen you divide $26.40 into 1? .037878.
“OK, so what?”
Slide the zeroes: The US dollar only stands for 3.78% of its initial purchasing power it held in 1913.
Even if we aren’t noticing, the rest of the world is. And that’s why the Fed is spending a Trillion Dollars buying our own paper. Sound familiar?
Read deeply on Charles Ponzi’s schemes… Wiki it and you’ll learn:
“Born and raised in Italy, he became known in the early 1920s as a swindler in North America for his money-making scheme. He promised clients a 50% profit within 45 days or 100% profit within 90 days, by buying discounted postal reply coupons in other countries and redeeming them at face value in the United States as a form of arbitrage.:1 In reality, Ponzi was paying earlier investors using the investments of later investors. While this type of fraudulent investment scheme was not originally invented by Ponzi, it became so identified with him that it now is referred to as a “Ponzi scheme”. His scheme ran for over a year before it collapsed, costing his “investors” $20 million. “
The difference between Charles Ponzi and the Federal Reserve?
Well, Ponzi was a con man and swindler. The Federal Reserve is merely acting-out the moneychanger role from the free-lunchers in Congress who spend more than this “Great Nation” takes in as income. Have for decades. Deficit spending is the road to socialism, or does the Left Wing school curriula not mention this, anymore?
All of which gets us to a critical-thinking crossroads: With the end of growth, the pendency of the Manufacturer’s Resource wars a given, with money not standing (as it once did) for “good delivery” and needing COVER – a scapegoat – someone or something to BLAME, what would the powers that be do?
I have a five letter suspicioun: Wuhan.
End Game Options
We have a number of possible long-term outcomes from all this:
- Wuhan “burns out” and life goes back to normal but markets are halved. Recovery is slow and takes years.
- Wuhan “burns out” but recover doesn’t happen – and either the U.S. or China, or Russia decides to become adventuresome. World War III erupts.
- Wuhan – as posited by Dave Hodges of The Common Sense Show – is designed by enemies of America to drive us into Civil War (as in .mil training exercise Jade Helm 15-style).
- Wuhan does not “burn out” and becomes a long-term research project to “find a cure” while a devious “maintenance dose” of some miracle drug would be required to remain alive, thus giving the PowersThatBe control over everyone on Earth.
- Wuhan does not “burn out” and within a generation, global population is reduced by 75%, or more. And we go into the history books as a kind of latter-day Atlantis.
- The “mushrooms go up” as nuclear powers blame one another for CV19…
All unthinkable, unknowable, highly speculative, but nothing can be totally ruled out yet.
All we can do is connect dots, run projections, and remind everyone that the 1 percent is really the 1/8th of 1 percent and none of us will be spared whatever dynamics are in play.
Still, there are areas of good news to savor…well, one, anyway:
NYC School Walk-Back
The would-be criminal Bill De Blasio was forced by public ourage at his verging of war crimes decision to keep NY Schools open. So, he’s walked it back (but in our book, he’s still an idiot).
Details about how the NY lockdown is coming along may be found in the remnants of the NY Times here. Harsh locking down bars, though, especially if you have small-caliber politicians who would drive any sane person to drink…
Change Rates first:
Main thing here is that when we had a smaller than expected 9,000 increase yesterday, it seemed likely to get “caught up” which it does in today’s data.
Cases (globally) outllook?
Easy bet to make: 1-million global cases by Tax Day.
For the local view, take the county you live in (say Maricopa, Arizona) and look up it’s population (4.307,033) and divide by the world population (7,640,000,000). In our example, this is 5.637477748691099e-4 which times today’s cases (169,387) means there may be 95.49 cases in the Phoenix area…assuming spread is semi-even – which it isn’t.
In the Shorts
Life goes on. Hat tip to Fortune for How swing-state economies have performed since the 2016 election in 6 maps.
And did you see where Apple fined $1.2 billion by French antitrust regulators over anti-competitive supplier deals.
Bill Gates resigns from boards of Microsoft and Berkshire Hathaway. Hmmm…Mr. Vaccine? We’ll lass on RC-1, thanks.
And stupid is as stupid does: Japan going ahead with Summer Olympics despite serious coronavirus concerns.
On that note, let’s see if the market drops 10% today, shall we?
NY Fed Repo Depot in with $148+ billion today: That’s about like $993 for every worker in America…where’sa my ViseGrips? Where’s my crack pipe…
Write when you get rich,