A Warning From the Great Depression

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3.28 million.

That is the total number of unemployment claims Americans filed last week — nearly five times the prior record of 695,000, from October 1982.

“We’ve known this number was coming for a week and a half,” laments Tom Gimbel, who captains a Chicago employment agency, adding:

It doesn’t surprise me at all. When you see a city like Las Vegas get shut down, I don’t know what other options there were than seeing a number like this.

A fellow must take his comforts where he can find them these days. And precious few are on offer.

But if it is consolation you seek, here you have it: Some economists had forecast as many as 7 million claims.

Here is additional cheer, however transient: The stock market had itself another day at the races today.

Stimulus, at Last!

The Dow Jones recaptured another 1,351 points. The S&P gained 154, the Nasdaq 413.

Today’s stock market surge follows last evening’s Senate passage of a $2 trillion relief package. It is the largest ever in United States history. The vote was unanimous.

The bill includes, per CNBC:

One-time direct payments to individuals, stronger unemployment insurance, loans and grants to businesses and more health care resources for hospitals, states and municipalities. It includes requirements that insurance providers cover preventive services for COVID-19.

Qualified individuals will receive cash payments of $1,200. Couples will receive $2,400… with an additional $500 for each child.

A Lobbyist’s Dream

883 pages in length, we can only imagine the skullduggery and chicanery within, the sweet venoms the lobbyists put in.

But who has time to read all 883 pages while American life dangles by a strand? And who can say no?

The legislation next goes to the House of Representatives for the rubber stamp — which it will assuredly receive tomorrow morning when the vote is scheduled.

Then it jumps to the White House for the presidential signature. Mr. Trump has pledged to sign it “immediately.”

Treasury Secretary Mnuchin said today the checks will mail within three weeks.

But as we have questioned previously… what will they accomplish?

Say’s Law

The issue at hand is not one of demand. It is one of supply. And a shuttered-in economy produces little.

Filling an idle man’s pocket with fabricated money does not increase supply. It merely increases the bid for existing supplies.

Let us not forget Say’s law — that supply creates its own demand. “Products are paid for with products,” argued Jean-Batiste Say over two centuries ago.

One man produces bread. Another produces shoes.

The cobbler who requires bread for his dinner appears before the baker. And the baker who must clad his feet appears before the baker.

They may transact in money… but money merely throws an illusory veil across their transactions.

Ultimately the baker purchases his shoes with the bread he has baked. And the cobbler purchases his bread with the shoes he has cobbled.

Concludes Monsieur Say:

Money performs but a momentary function in this double exchange; and when the transaction is finally closed, it will always be found that one kind of commodity has been exchanged for another.

The Government Attempts to Outlaw Say’s Law

Assume now a free economy in which supply and demand are allowed their unfettered reign. Assume an economy — that is — that does not presently exist.

You can expect supply and demand to come to terms, to come into rough equilibrium.

If there is less demand, prices will fall to meet it.

But when the government prints money with no production to match it… it attempts to outlaw Say’s law.

Consider the thought experiment of another 18th-century thinker David Hume…

Imagine a benevolent fairy slips money into all the nation’s pockets overnight. And so the money supply doubles at a stroke.

Is this nation doubly rich?

Alas, it is not. The money supply has been doubled, yes. But no additional goods have entered existence.

The new money will simply chase existing goods. We can therefore expect prices to approximately double.

The Real Source of Wealth

Explains the late economist Murray Rothbard:

What makes us rich is an abundance of goods, and what limits that abundance is a scarcity of resources: namely land, labor and capital. Multiplying coin will not whisk these resources into being. We may feel twice as rich for the moment, but clearly all we are doing is diluting the money supply. As the public rushes out to spend its newfound wealth, prices will, very roughly, double — or at least rise until the demand is satisfied, and money no longer bids against itself for the existing goods.

There you have the wisdom of classical economics. But then came the Great Depression, and out it went…

Out from under every rock slithered the cranks, chiselers, dreamers, something-for-nothing and wine-from-water men…

All promising salvation, all offering their quack medicines.

And they all found their way to Washington…

Destroying Food While People Starved

The farmers were in a bad way, they argued. These sad sacks could not fetch enough money for their produce or their livestock. And so they needed a hand up.

A program was therefore required to raise prices. The brain trust then in operation hatched a beautiful scheme. What was it?

To set fire to the crops and murder the livestock.

To be clear, they did not butcher the animals to bring to market — but precisely the opposite — to keep them off the market.

Ponder for one moment the reality of it:

While millions starved, entire crops were set ablaze. And millions of animals went into the ground… rather than growling bellies… all to raise the price of farm products.

What of the impoverished nonfarmers required to pay more for their basic sustenance? How would higher food prices benefit them? Or the overall economy? Might the money people saved on food allow them additional purchases from other industries?

The men with the grand pensees did not say… or did not care for the answers.

The same lunacy was brought to bear on other industries…

A Reign of Terror

Production above mandated levels was not permitted. Nor were prices permitted to fall beneath predetermined levels.

If a man flouted the rules… woe to him.

One man, a New Jersey tailor, was convicted and clapped into prison. What was this hellcat’s “crime”?

He pressed a suit for 35 cents. Law required the job be done for 40 cents.

Meantime, New York’s garment industry endured a mighty terror, explains 1930s journalist John Flynn:

The code-enforcement police roamed through the garment district like storm-troopers. They could enter a man’s factory, send him out, line up his employees, subject them to minute interrogation, take over his books on the instant. Night work was forbidden. Flying squadrons of these private coat-and-suit police went through the district at night, battering down doors with axes looking for men who were committing the crime of sewing a pair of pants at night.

(We acknowledge economist Thomas DiLorenzo for the source material.)

Examples abound. Here is the central lesson:

At a time when lower prices and greater production were most needed… lower prices and greater production were violently suppressed.

This was the economic wisdom of the day. And now in this, our own time of economic crisis…

A fresh roster of cranks, chiselers, dreamers, something-for-nothing and wine-from-water men will afflict us anew.

1930s Redux

They would treat us to another New Deal — green in color — to haul us up.

Modern Monetary Theory is our salvation, they will croon.

Medicare for All will be the promised cure for the next pandemic.

All war with the ancient and iron laws of economics that time has proven valid.

Yet as in the 1930s… a fearful and desperate America may yet embrace them.

Regards

Brian Maher
Managing editor, The Daily Reckoning

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Get Ready for World Money

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Since Federal Reserve resources were barely able to prevent complete collapse in 2008, it should be expected that an even larger collapse will overwhelm the Fed’s balance sheet.

That’s exactly the situation we’re facing right now.

The specter of a global debt crisis suggests the urgency for new liquidity sources, bigger than those that central banks can provide. The logic leads quickly to one currency for the planet.

The task of re-liquefying the world will fall to the IMF because the IMF will have the only clean balance sheet left among official institutions. The IMF will rise to the occasion with a towering issuance of special drawing rights (SDRs), and this monetary operation will effectively end the dollar’s role as the leading reserve currency.

The Federal Reserve has a printing press, they can print dollars. The IMF also has a printing press and can print SDRs. It’s just world money that could be handed out.

The IMF could function like a central bank through more frequent issuance of SDRs and by encouraging the use of “private SDRs” by banks and borrowers.

What exactly is an SDR?

The SDR is a form of world money printed by the IMF. It was created in 1969 as the realization of an earlier idea for world money called the “bancor,” proposed by John Maynard Keynes at the Bretton Woods conference in 1944.

The bancor was never adopted, but the SDR has been going strong for 50 years. I am often asked, “If I had 100 SDRs how many dollars would that be worth? How many euros would that be worth?”

There’s a formula for determining that, and as of today there are five currencies in the formula: dollars, sterling, yen, euros and yuan. Those are the five currencies that comprise in the SDR calculation.

The important thing to realize that the SDR is a source of potentially unlimited global liquidity. That’s why SDRs were invented in 1969 (when the world was seeking alternatives to the dollar), and that’s why they will be used in the imminent future.

At the previous rate of progress, it may have taken decades for the SDR to pose a serious challenge to the dollar. But as I’ve said for years, that process could be rapidly accelerated in a financial crisis where the world needed liquidity and the central banks were unable to provide it because they still have not normalized their balance sheets from the last crisis.

“In that case,” I’ve argued previously, “the replacement of the dollar could happen almost overnight.”

Well, guess what?

We’re facing a global financial crisis worse even than 2008. That’s because each crisis is larger than the previous one. The reason has to do with the system scale. In complex dynamic systems such as capital markets, risk is an exponential function of system scale. Increasing market scale correlates with exponentially larger market collapses.

This means a market panic far larger than the Panic of 2008.

SDRs have been used before. They were issued in several tranches during the monetary turmoil between 1971 and 1981 before they were put back on the shelf. In 2009 (also in a time of financial crisis). A new issue of SDRs was distributed to IMF members to provide liquidity after the panic of 2008.

The 2009 issuance was a case of the IMF “testing the plumbing” of the system to make sure it worked properly. With no issuance of SDRs for 28 years, from 1981–2009, the IMF wanted to rehearse the governance, computational and legal processes for issuing SDRs.

The purpose was partly to alleviate liquidity concerns at the time, but also partly to make sure the system works in case a large new issuance was needed on short notice. The 2009 experience showed the system worked fine.

Since 2009, the IMF has proceeded in slow steps to create a platform for massive new issuances of SDRs and the creation of a deep liquid pool of SDR-denominated assets.

On Jan. 7, 2011, the IMF issued a master plan for replacing the dollar with SDRs. This included the creation of an SDR bond market, SDR dealers, and ancillary facilities such as repos, derivatives, settlement and clearance channels, and the entire apparatus of a liquid bond market. A liquid bond market is critical.

The IMF study recommended that the SDR bond market replicate the infrastructure of the U.S. Treasury market, with hedging, financing, settlement and clearance mechanisms substantially similar to those used to support trading in Treasury securities today.

In November 2015, the Executive Committee of the IMF formally voted to admit the Chinese yuan into the basket of currencies into which an SDR is convertible.

In July 2016, the IMF issued a paper calling for the creation of a private SDR bond market. These bonds are called “M-SDRs” (for market SDRs) in contrast to “O-SDRs” (for official SDRs).

In August 2016, the World Bank announced that it would issue SDR-denominated bonds to private purchasers. Industrial and Commercial Bank of China (ICBC), the largest bank in China, will be the lead underwriter on the deal.

In September 2016, the IMF included the Chinese yuan in the SDR basket, giving China seat at the monetary table.

Over the next several years, we will see the issuance of SDRs to transnational organizations, such as the U.N. and World Bank, to be spent on climate change infrastructure and other elite pet projects outside the supervision of any democratically elected bodies. (I call this the New Blueprint for Worldwide Inflation.)

The SDR can be issued in abundance to IMF members and can also be used in the future for a select list of the most important transactions in the world, including balance-of-payments settlements, oil pricing and the financial accounts of the world’s largest corporations, such as Exxon Mobil, Toyota and Royal Dutch Shell.

So the international monetary elite has been awaiting the global liquidity crisis that we’re facing right now. In the not-too-distant future, there will be massive issuances of SDRs to return liquidity to the world. The result will be the end of the dollar as the leading global reserve currency.

SDRs will perhaps never be issued in bank note form and may never be used on an everyday basis by citizens around the world. But even such limited usage does not alter the fact that the SDR is world money controlled by elites.

But monetary resets have happened three times before, in 1914, 1939 and 1971. On average, it happens about every 30 or 40 years. We’re going on 50.

So we’re long overdue.

You’ll still have dollars, but they’ll be local currency like the Mexican peso, for example. But its global dominance will end.

Based on past practice, we can expect that the dollar will be devalued by 50–80% in the coming years.

A devaluation of this magnitude will wipe out the value of your life’s savings. You’ll still have just as many dollars, but they won’t be worth nearly as much.

Individuals will not be allowed to own SDRs, but you can still protect your wealth by buying gold — if you can find any.

Regards,

Jim Rickards
for The Daily Reckoning

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The Great Dollar Shortage

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The coronavirus pandemic is a human tragedy. It’s also an economic tragedy, as the global economy is collapsing around us.

Second-quarter U.S. GDP may drop as much as 30%, which is a staggering figure. Many economists predict a third-quarter recovery, but there are still so many unknowns that it’s impossible to say.

It’s still too soon to say when America will reopen for business. And you can’t just flip a switch and return things to normal. That’s not how economies function.

Many industries may never recover and millions may be out of work for extended periods.

At the very least, we’re heading into a severe recession. And we could well be heading for a full-scale depression.

That’s not being alarmist.

The crisis will also accelerate the collapse of the dollar as the world’s leading reserve currency. So you need to prepare now. What do I mean?

The U.S. dollar is at the center of global trade.

The dollar represents about 60% of global reserve assets, 80% of global payments and almost 100% of global oil sales. About 40% of the world’s debt is issued in dollars.

The Bank for International Settlements (BIS) estimates that foreign banks hold over $13 trillion in dollar-denominated assets.

All this, despite the fact that the U.S. economy only accounts for about 15% of global GDP.

The reason the dollar is the world’s leading reserve currency is because there’s a very large liquid dollar-denominated bond market. Investors can go buy 30-day 10-year, 30-year Treasury notes, etc. The point is there’s a deep, liquid dollar-denominated bond market.

But the coronavirus crisis is creating a massive problem for foreign nations dependent on the dollar.

That’s because the world is facing a critical dollar shortage.

Many observers are surprised to hear about a dollar shortage. After all, didn’t the Fed print almost $4 trillion to bail out the system after 2008?

Yes, but while the Fed was printing $4 trillion, the world was creating $100 trillion in new debt.

This huge debt pyramid was fine as long as global growth was solid and dollars were flowing out of the U.S. and into emerging markets.

But that’s no longer the case, and that’s an understatement. Global growth was anemic before the crisis hit. Now it’s contracting rapidly.

If dollars are in short supply, China can’t control its currency and emerging markets can’t roll over their debts.

But again, you might say, isn’t the Fed engaged in its most massive liquidity injections ever and extending swap lines to foreign central banks to ensure they can access dollars?

Yes, but it’s not nearly enough to meet global funding needs.

Foreign nations are scrambling to acquire dollars right now. And that surging demand for dollars only drives up the value of the dollar, which puts additional strain on their ability to service debt.

When those debt holders want their money back, $4 trillion is not enough to finance $100 trillion, unless new debt replaces the old. That’s what causes a global liquidity crisis.

We’re facing a global liquidity crisis far worse than the one that occurred in 2008. In fact, the world is heading for a debt crisis not seen since the 1930s.

The trend away from the dollar was already underway before the latest crisis, led by China and Russia. Now that trend will greatly accelerate as the world seeks to eliminate, or greatly reduce, its dependence on the dollar.

That’s not just my opinion, by the way. Here’s what Eswar Prasad, former head of the IMF’s China team, says:

“The dollar’s surge will renew calls for a shift from a dollar-centric global financial system.”

It can happen much faster than you think. And the dollar’s days are more numbered now than ever.

But what will replace it? And why can you expect the dollar to lose up to 80% of its value in the years ahead? Read on.

Regards

Jim Rickards
for The Daily Reckoning

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The Only Way to Avoid Depression?

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Hope, it is said, springs eternal.

Today the stock market was up and away on hopeful wings… for it believes “fiscal stimulus” is imminent.

Nancy Pelosi gushed there was “real optimism” about a deal today. Sen. Charles Schumer conferred with Treasury Secretary Steven Mnuchin.

Said the senator:

There are still a few little differences. Neither of us think they are in any way going to get in the way of a final agreement.

At writing, no agreement has been reached.

The Dow Jones nonetheless regained 11.26% today, a full 2,093 points — its finest day since October 2008.

Both S&P and Nasdaq turned in comparable romps.

But when you want it bad, you often get it — bad.

Getting It Bad

We have no doubt the lobbyists have been busy. Crisis is when these swamp inhabitants sniff their chance.

Any legislation will be loaded to the rails with “stimulus” having nothing to do with the economic cataclysm before us.

But it will butter their parsnips.

Most in Congress who vote for the bill will never even read it… precisely as they failed to read the Patriot Act in 2001.

“Never let a good crisis go to waste,” as a certain Obama official said after the next crisis.

Coming home…

Taxpayer money will flow to the same corporations that took on record debts this past decade to conduct stock buybacks and other financial gimmickry.

Might corporations have rebuilt their balance sheets, restocked their acorns for winter, stored in reserves for lean times?

They might have, yes. Alas they did not. The lure of stock market riches tugged too strongly.

But it is laissez-faire in bountiful times — and aidez-nous when events swing against them.

But let it go for now. Consider instead this question:.

What will a deluge of fiscal stimulus accomplish… besides plunging the entire nation deeper into debt?

A Recipe for Inflation

The gears of commerce have wound to a violent and arresting halt.

The nation faces a “supply” shortage, that is — not a “demand” shortage.

It is not possible to purchase goods that do not exist.

And so massively more money will chase fewer goods. That of course writes a recipe for inflation. Potentially even hyperinflation.

Perhaps that is why gold takes impending fiscal stimulus rather differently than the stock market…

Gold went rocketing $92 today. Yes, $92.

We can recall nothing comparable.

And Goldman Sachs hollers it is time to buy this, “the currency of last resort.”

Meantime, our men inform us that acquiring physical gold is nearly impossible.

Jim Rickards warned his readers for years to purchase gold before the crisis came. It would prove impossible to find afterward, he said.

The crisis has come.

Plunging Into Depression

Morgan Stanley and Goldman Sachs estimate second-quarter United States GDP will plummet 30%. And unemployment will run to 13%.

Morgan Stanley economists:

Economic activity has come to a near standstill in March. As social distancing measures increase in a greater number of areas and as financial conditions tighten further, the negative effects on near-term GDP growth become that much greater.

These crackerjacks project a third-quarter recovery springing from the looming stimulus.

But what if social distancing measures remain in place? What if supply chains snap entirely under the load?

What if the dose of economic medicine fails to end the cardiac arrest?

The prospects of depression are suddenly and vividly acute.

Debt Is Already Too High

But before the Great Depression, United States government debt ran to $17 billion. Yes, of course the economy was far smaller.

But the nation’s debt-to-GDP ratio was a mere 16%. Even in 1941 — after all the New Deal borrowing sprees — the ratio stood at a fair 44%.

But today the United States debt exceeds $23 trillion. And its debt-to-GDP ratio already exceeds 105%.

The nation simply lacks the capacity for a debt extravaganza.

The dollar itself might not survive the deluge, all confidence lost.

“The pen shrinks to write, the heart sickens to conceive” the enormity of the coming toothache.

Meantime, the Congressional Budget Office (CBO) had previously projected economic growth to limp along at an average 1.9% per annum through 2029.

Yet that guttering 1.9% did not account for recession — much less depression.

Whence cometh the growth… should the United States economy sink into depression’s black depths?

Is there a way out?

There may be. We have presented the option before…

The Least Bad Option?

You may have laughed it out of court at the time. But laugh no longer, such are the depths of the hells before us.

We refer to a debt jubilee.

That is, the mass forgiveness of debt.

Heave the ledger book into a roaring fire. Run a blue pen over the red ink. Wipe the tablet entirely (or largely) clean.

It may be the best available way up, argues economist Michael Hudson:

Massive social distancing, with its accompanying job losses, stock dives and huge bailouts to corporations, raises the threat of a depression. But it doesn’t have to be this way. History offers us another alternative in such situations: a debt jubilee. This slate-cleaning, balance-restoring step recognizes the fundamental truth that when debts grow too large to be paid without reducing debtors to poverty, the way to hold society together and restore balance is simply to cancel the bad debts…

The way to restore normalcy today is a debt write-down. The debts in deepest arrears and most likely to default are student debts, medical debts, general consumer debts and purely speculative debts. They block spending on goods and services, shrinking the “real” economy. A debt write-down would be pragmatic, not merely a moral sympathy with the less affluent.

This Hudson fellow has looked into debt jubilees through history.

Why Kings Wiped out Debt

The practice began some 5,000 years distant in ancient Sumer and Babylon… where a newly enthroned king would delete the people’s debts.

Was it because the new king was a swell fellow? Or because he was an ancient Marxist?

No. He cleared the books to preserve his own head. He was alert — keenly — to social stability.

Hudson:

The word Jubilee comes from the Hebrew word for trumpet — yobel. In Mosaic Law, it was blown every 50 years to signal the Year of the Lord, in which personal debts were to be canceled…

Until recently, historians doubted that such a debt jubilee would have been possible in practice or that such proclamations could have been enforced. But Assyriologists have found that from the beginning of recorded history in the Near East, it was normal for new rulers to proclaim a debt amnesty upon taking the throne. Instead of blowing a trumpet, the ruler “raised the sacred torch” to signal the amnesty.

It is now understood that these rulers were not being utopian or idealistic in forgiving debts. The alternative would have been for debtors to fall into bondage. Kingdoms would have lost their labor force, since so many would be working off debts to their creditors. Many debtors would have run away (much as Greeks emigrated en masse after their recent debt crisis) and communities would have been prone to attack from without.

A Fairly Recent Debt Jubilee

But the United States, anno Domini 2020, is not Babylon, 3,000 B.C.

Is there a more contemporary example of a debt jubilee?

Yes, says Hudson. Look to West Germany in 1948:

In fact, it could create what the Germans called an “Economic Miracle” — their own modern debt jubilee in 1948, the currency reform administered by the Allied Powers. When the Deutsche mark was introduced, replacing the Reichsmark, 90% of government and private debt was wiped out. Germany emerged as an almost debt-free economy, with low costs of production that jump-started its modern economy.

Not a Perfect Answer

Is a debt jubilee a vast swindle, a rooking of honest lenders and the absolution of the wicked?

It may well be.

“The wicked borrows and cannot pay back”… as Psalm 37:21 informs us.

Who would loan anyone money at all — knowing one day he may be left holding an empty bag?

And who would lend money to the deadbeat United States government? How would it fund its bread and circuses?

We have no answers.

In short, a debt jubilee would unquestionably produce its own migraines.

But is it worse than the alternative?

Regards,

Brian Maher
Managing editor, The Daily Reckoning

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Rickards: It’ll Get Worse it Before It Gets Better

This post Rickards: It’ll Get Worse it Before It Gets Better appeared first on Daily Reckoning.

We’re well into the coronavirus pandemic at this point. As of this writing, there are 360,765 reported infections and 15,491 deaths worldwide.

Over the next few days, you may be certain that those numbers will be significantly higher.

That’s how pandemics work. The cases and fatalities don’t grow in a linear fashion; they grow exponentially.

It’s widely acknowledged that this pandemic will get much worse before it gets better. There’s no doubt about that.

It didn’t take long for the coronavirus crisis to turn into an economic and financial crisis.

The Worst Collapse Since the Great Depression

The U.S. is falling into the worst economic collapse since the Great Depression in 1929. This will be worse than the dot-com collapse of 2000–01 and worse than the Great Recession and global financial crisis of 2008–09.

Don’t be surprised to see second-quarter GDP drop by 10% or more and for the unemployment rate to race past 10% on its way to 15% or higher.

The questions for economists are whether the lost output will be permanent or temporary and whether U.S. growth will return to trend or settle on a new path that is below the pre-virus trend.

Some lost expenditure may just be a timing difference. If I plan to buy a new car this month and decide not to buy it until August, that’s just a timing difference; the sale is not permanently lost.

But if I don’t go out for dinner tonight and then do go out a month from now, I’m not going to order two dinners. The skipped dinner is a permanent loss.

Unfortunately, 70% of the U.S. economy is based on consumption and the majority of that consists of services rather than goods. This suggests that much of the coronavirus impact will consist of permanent losses, not timing differences.

More important is the question of whether growth returns to trend by next year or follows a new lower trend. (Bear in mind that “trend” for the past 11 years has been 2.2% growth compared with average growth in all recoveries since 1980 of 3.2%; any decline in trend growth would be from an already low base.)

This is unknown, but the result will be as much psychological as policy driven.

The Fed’s Bazooka Is Empty

In situations like this, the standard policy response is for the Fed to cut rates, which it has certainly done.

The Fed has also launched massive amounts of quantitative easing.

In addition, they have guaranteed or offered credit facilities to banks, primary dealers, money market funds, the municipal bond market and commercial paper issuers so far.

Now the central bank has taken the unprecedented step of committing to buy as many U.S. government bonds and mortgage-backed securities as needed to keep the market functioning.

The problem is that the Fed’s programs won’t work as a form of stimulus. We’re seeing a supply shock as the economy grinds to a standstill. What’s everyone going to buy with all the money?

Still, they may have done things exactly backward.

Mohamed El-Erian, chief economic adviser at Allianz, says that the Fed should have focused on payment system problems and liquidity first but should not have cut rates.

Interest rates were already quite low. Once the Fed goes to zero as they did, they are incapable of cutting rates further (leaving aside negative rates, which also don’t provide stimulus).

El-Erian argues the Fed should have saved their rate cuts in case they are needed more acutely in the weeks ahead. Too late now. The interest rate bullets were fired. Now the Fed’s bazooka is empty at the worst possible time.

No Stimulus Bill

Meanwhile, Congress is working to pass a “stimulus” bill to fight the economic effects of the coronavirus pandemic.

Negotiations stalled this morning as Democrats want to insert provisions that would give tax credits to the solar and wind industry, give more power to unions and introduce new emissions standards for the airline industry.

“Democrats won’t let us fund hospitals or save small businesses unless they get to dust off the Green New Deal,” said Senate Majority Leader Mitch McConnell.

Once again, I need to emphasize the point: The economic impact of coronavirus could be devastating.

If consumers get used to not spending and decide that increased savings and debt reduction are the best ways to prepare for another virus or natural disaster, then velocity will fall and growth will be weak no matter how much money the Fed prints or the Congress spends.

The bottom line is that these spending bills provide spending but they do not provide stimulus. That’s up to consumers. And right now consumers are hunkered down.

It may be that the last of the big spenders just left town.

Gold Roars $75

Markets were down again today, what a surprise. The Dow lost another 600 points, finishing the day at 18,591.

Meanwhile, gold was up about $75 today. Physical supply is drying up and dealers are running out.

That’s why I’ve been warning my readers for years to get their gold before the crisis hits. Once it does (and it has), you won’t be able to get any.

What about silver?

You Should Get a “Monster Box”

Silver’s dynamics are a little bit different than gold because there are some industrial applications, but there’s no question that it’s a monetary metal.

And I always recommend that people have a “monster box.” A monster box is 500 American Silver Eagles, fine pure silver that comes directly from the Mint. It comes in a green case and is sealed.

The 500 coins at retailer commission will run you about $12,000 right now, but everybody should have one.

You ought to have a monster box of silver because if the power grid goes down, which could happen for a lot of reasons, the ATMs won’t work and neither will credit cards.

But if you walk into a store with five or six silver coins, you’ll be able to get groceries for your family.

Believe me, that’ll be legal tender when the time comes, so I definitely recommend silver.

Regards,

Jim Rickards
for The Daily Reckoning

The post Rickards: It’ll Get Worse it Before It Gets Better appeared first on Daily Reckoning.

Go Big or Go Home

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To understand why the financial dominoes toppled by the Covid-19 pandemic lead to global insolvency, let’s start with a household example. The point of this exercise is to distinguish between the market value of assets and net worth, which is what’s left after debts are subtracted from the market value of assets.

Let’s say the household has done very well for itself and owns assets worth $1 million: a home, a family business, 401K retirement accounts and a portfolio of stocks and other investments.

The household also has $500,000 in debts: home mortgage, auto loans, student loans and credit card balances.

The household net worth is thus $1,00‌0,00‌0 minus $500,000 = $500,000.

Let’s say a typical financial crisis and recession occur, and the household’s assets fall 30%. 30% of $1 million is $300,000, so the market value of the household’s assets falls to $700,000.

Deduct the $500,000 in debts and the household’s net worth has fallen to $200,000. The point here is debts remain regardless of what happens to the market value of assets owned by the household.

Then the speculative asset bubbles re-inflate, and the household takes on more debt in the euphoric expansion of confidence to buy a larger house, expand the family business and enjoy life more.

Now the household assets are worth $2 million, but debt has risen to $1.5 million. Net worth remains at $500,000, since debt has risen along with asset values.

Alas, all bubbles pop, and the market value of the household assets decline by 30%, or $600,000. Now the household assets are worth $2,00‌0,00‌0 minus $600,000 or $1,400,000. The household net worth is now $1,40‌0,00‌0 minus $1,50‌0,00‌0 or negative $100,000. The household is insolvent.

On top of that, the net income of the family business plummets to near-zero in the recession, leaving insufficient income to pay all the debts the household has taken on.

This is an exact analog for the entire global economy, which pre-pandemic had assets with a market value of $350 trillion and debts of $255 trillion and thus a net worth of around $100 trillion.

The $11 trillion that has evaporated in the market value of U.S. stocks is only a taste of the losses in market value. Global stock markets has lost $30 trillion, and once yields rise despite central bank manipulations (oops, I mean intervention), $30 trillion in the market value of bonds will vanish into thin air.

The market value of junk bonds has already plummeted by trillions, and that’s not even counting the trillions lost in small business equity, shadow banking and a host of other non-tradable assets.

Then there’s the most massive asset bubble of all, real estate. Millions of properties delusional owners still think are worth $1.4 million will soon revert to a more reality-based valuation around $400,000, or perhaps even less, meaning $1 million per property will melt into air.

Once the market value of global assets falls by $100 trillion, the world is insolvent.

Everyone expecting the financial markets to magically return to January 2020 levels once the pandemic dies down is delusional. All the dominoes of crashing market valuations, crashing incomes, crashing profits and soaring defaults will take down all the fantasy-based valuations of bubblicious assets:

Stocks, bonds, real estate, bat guano, you name it.

The global financial system has already lost $100 trillion in market value, and therefore it’s already insolvent. The only question remaining is how insolvent?

Here’s a hint: companies whose shares were recently worth $500 or $300 will be worth $10 or $20 when this is over. Bonds that were supposedly “safe” will lose 50% of their market value. Real estate will be lucky to retain 40% of its current value. And so on.

As net worth crashes below zero, debts remain. The loans must still be serviced or paid off, and if the borrowers default, then the losses must be absorbed by the lenders or taxpayers, if we get a repeat of 2008 and the insolvent taxpayers are forced to bail out the insolvent financial elites.

Here’s the S&P 500. Where is the bottom?

There is no bottom, but nobody dares say this. Companies with negative profits have no value other than the cash on hand and the near-zero auction value of other assets. Subtract their immense debts and they have negative net worth, and therefore the market value of their stock is zero.

But don’t worry, the government is on the case…

That governments around the world will be forced to distribute “helicopter money” to keep their people fed and housed and their economies from imploding is already a given. Closing all non-essential businesses and gatherings will crimp the livelihood of millions of households and small businesses that lack the financial resources to survive weeks without any revenues.

The only question is whether governments which can borrow or print fresh currency will get ahead of the implosion or fall behind, creating a binary choice: go big now or go home.

Half-measures in helicopter money work about as well as half-measures in quarantine, i.e. they fail to achieve the intended objectives. Dribbling out modest low-interest loans is a half-measure, as is cutting payroll taxes.

Neither measure will help employees or small businesses whose income has fallen below the minimum needed to pay essential bills: rent, food, utilities, etc.

Meanwhile, the ruling elites will be under increasing pressure to bail out greedy financial elites and gamblers. Those are the scoundrels and parasites they bailed out in 2008-09. But this is not just another speculative bubble-pop, this is a matter of life and death and solvency for the masses of at-risk households and small businesses.

It is a different zeitgeist and a different crisis, and bailing out greedy parasites (banks, indebted corporations, speculators, financiers, etc.) will not go over big while households and small businesses are going bankrupt.

The Federal Reserve has been handed a lesson in the ineffectiveness of the usual monetary “bazooka” in bailing out the predatory-parasitic class of overleveraged gamblers. Nearly free money for financiers isn’t going to save the economy or non-elites sliding toward insolvency.

Instead of leaving the bottom 99.5% to twist in the wind while enriching the predatory-parasitic class, the ruling elites will have to let the top 0.5% twist in the wind and save the bottom 99.5%. This will require going against all the thousands of lobbyists, all the chums at the club, and all the millions in campaign contributions, but it’s a binary choice.

Either save your citizenry or sacrifice your legitimacy by bailing out the predatory-parasitic class. If the ruling elites save their parasitic pals, the public will demand the scalps of the predatory-parasitic class, and as the crisis deepens, they will eject every craven, greedy elected toady who caved in to the predatory-parasitic class.

So listen up ruling elites: either go big or go home. Either accept that it’s going to take several trillion dollars in helicopter money to insure the most vulnerable households and real-world enterprises remain solvent, or quit and go home.

The pandemic crisis isn’t going to end in April or May, though the urge to indulge in such magical thinking is powerful. It might still be expanding in August and September.

This is why it’s imperative to go big now, and make plans to sustain the most vulnerable households and small employers not for two weeks but for six months, or however long proves necessary.

Regards,

Charles Hugh Smith
for The Daily Reckoning

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It’s Over

This post It’s Over appeared first on Daily Reckoning.

The financial elites are pushing a narrative that asset prices, sales and profits will all return to January 2020 levels as soon as the Covid-19 pandemic fades.

Get real, baby.

Nothing is going back to January 2020 levels. Rather than the “V-shaped recovery” expected by Goldman Sachs et al., the crash in asset prices will eventually gather momentum.

Why? It’s simple: for 20 years we’ve over-invested in speculative bubbles and squandered borrowed money on consumption and under-invested in productivity-increasing assets.

To understand why the market value of assets will relentlessly reprice lower, a process sure to be interrupted with manic rallies and false dawns of hope that a return to speculative good times is just around the corner, let’s start with the basics:

The only sustainable way to increase broad-based wealth is to boost productivity across the entire economy.

That means producing more goods and services with less capital, less labor and fewer inputs such as energy.

Rather than boost productivity, we’ve lowered productivity via mal-investment and by propping up unproductive sectors with immense sums of borrowed money.

The poster child for this dynamic is higher education: rather than being pushed to innovate as costs skyrocketed, the higher education cartel passed its inefficiencies and bloated cost structure onto students, who have paid for the bloat with $1. 6 trillion in student loans few can afford.

As for Corporate America squandering $4.5 trillion on stock buybacks, the effective gains on productivity from this stupendous sum is not just zero. It’s negative, as the resulting speculative bubble suckered in institutions and individuals who’d been stripped of safe returns by the Federal Reserve’s low-interest-rates-forever policy.

What could that $4.5 trillion have purchased in terms of increasing the productivity of the entire economy?

Considerably more than the zero productivity generated by stock buybacks. The net result of uneven gains in productivity and the asymmetric distribution of whatever gains have been made is stagnant wages for the bottom 90% and rising costs for everyone.

Those of us who are self-employed or owners of small businesses know that healthcare insurance costs have been ratcheting higher by 10% or more annually for years.

Whatever gains in health that have been purchased with the additional trillions of dollars poured into the healthcare cartels have been offset with declining life spans, soaring addictions to opioids and numerous broad-based declines in overall health.

The widespread addiction to smartphones and social media have deranged and distracted millions, crushing productivity while greatly increasing loneliness, insecurity and a host of social ills.

Two dynamics define the economy in the 21st century:

1. We have substituted debt-driven speculation for productive investment

2. We have substituted debt for earnings

This is why the repricing of speculative-bubble assets can’t be stopped: debt-driven speculation is not a sustainable substitute for investing in increasing productivity, and debt-fueled consumption masquerading as “investment” is not a sustainable substitute for limiting consumption to what we earn and save.

All bubbles pop, period. Once Corporate America’s credit lines are pulled and its revenues and profits plummet, the financial manipulation of stock buybacks will end. That spells the end of the 12-year bull market in stocks.

As the tide of speculative mania ebbs and confidence wanes, the world’s housing bubbles will all pop, and the $1.4 million bungalows will drift back down to their Bubble #1 highs around $400,000, and perhaps even drop from there.

As for collectibles and other play-things of the super-wealthy: the bids will soon vanish and yachts will be set adrift to avoid paying the dock fees.

Regards,

Charles Hugh Smith
for The Daily Reckoning

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A Disease of the Mind

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What are we afraid of? In recent weeks, I have been travelling around the globe and observing the rapid emptying of airports.

Does this mean that most people are in a panic over a new form of highly infectious flu?

It called to mind my studies long ago with the great economist and game theorist Thomas Schelling, who won the Nobel Prize in economics in 2005 mostly for his theories of “micromotives and macrobehavior.”

His book by that title showed that such phenomena as empty airports or traffic-jammed freeways or even segregated communities could reflect only the slightest changes in mindset.

Even small changes in people’s minds, oriented in the same direction, can effect massive changes in people’s collective behavior.

“Though a society can resist epidemics of physical disease,” as I paraphrase philosopher-psychologist Karl Jung in Wealth & Poverty

“It is defenseless against diseases of the mind. Against ‘psychic epidemics’ our laws and medicines and great factories and fortunes are virtually helpless.”

We’re currently facing a disease of the mind as well as a disease of the body.

Before my weekend break, my publisher interviewed me on the impact of the coronavirus.

Hey, I also have views on Tom Brady, quantum computing, President Trump, artificial intelligence, Bernie Sanders, integrated circuits, Pope Francis, 5G, Ronan Farrow, Wi-Fi 6, Kobe Bryant, the electromagnetic spectrum and Harvey Weinstein, among others.

I also have views on women that are too salacious to divulge at my age.

I share with most other commentators a lack of any relevant expertise or knowledge on the subject of the virus.

I suppose that under duress I could tell you the difference between bacteria and viruses. I am not altogether clear why a virus is harder for the immune system to combat, though I suppose it has something to do with the virus hitchhiking on other cells, using its Trojan horse strategy.

You get the picture, an ignoramus with the usual smattering of conventional knowledge — what the great Spanish philosopher José Ortega y Gasset called a “barbarian of specialization.”

I parlay my knowledge of certain particular fields into opinions on subjects on which I know little.

The barbarians are invading everywhere these days, using their confidence as actors, or microchip experts, or lawyers, or doctors of philosophy, or politicians to express confident opinions on subjects they know nothing about, such as God or CV-19.

I have a brilliant daughter who is a physician at a refugee camp in Thailand and may be in charge of its response. She believes anti-malarial drugs may be effective. I have a son who works for American Airlines and a daughter-in-law who works for JetBlue.

They can comment on the impact on the travel industry. It is understandably dire, but air travel is not going to go away.

I’ve had the flu from time to time and I’ve been to China, Italy and London.

Diamonds Form Under Pressure

What I do know something about is capitalism and markets. The barbarians today seem to believe that a crisis is abnormal in a capitalist economy and requires major government intervention to address.

This is an advantage for all of you who know that capitalism, in Nassim Taleb’s coinage, is “anti-fragile.” It gets stronger under pressure.

A crisis is a buying opportunity. It also is a learning process. Since real economic growth is learning, you can learn as you buy. Crises tend to accelerate long-term growth.

As Andy Kessler observes in The Wall Street Journal, crises like this are also inflection points.

“The current market turmoil tells me a new era is breaking, so question everything. Will cable, energy, mobile and social media ever come back? And if not, what’s next?”

Crises change economic leaders, filter out vulnerable companies, strengthen the survivors and open the way to new industries.

I’m involved with a number of biotech companies started by my young genius pal Matt Scholz.

He has many interesting views on the crisis and one of his companies may have already developed a vaccine. And so have various rivals. But the issue is how quickly vaccines can be produced in volume. I think I heard something like a year.

As an alternative, Matt points to existing anti-malarial drugs, which have been shown to mitigate the effects of the virus:

If I were running the country, I’d squeeze a big pharma and pay them to make tons of this stuff tomorrow. Then I’d start giving it to every geriatric person who can safely take it if they have been anywhere near a SARS-CoV-2-positive person as post-exposure prophylaxis!

After that, I’d start giving it to younger patients who test positive and have worsening symptoms. It’s admittedly a bit of a swing for the fences, but small-molecule drug manufacturing is scalable and cheap — health care providers and critical care infrastructure are neither. Even with a modest effect size, keeping the most vulnerable patients healthy could be life or death for the health care system itself. It would also allow younger people to get back to work without undue risk and give us a shot at preventing an economic catastrophe of epic proportions. We already know these drugs are well-tolerated; we’ve given them to healthy travelers on their way to malaria-endemic regions for decades.

It’s true that we don’t yet have proper large double-blind placebo-controlled trials proving they work for this purpose, but by the time we do, we’ll have lost many thousands of lives and billions of dollars.

That’s the problem not developing solutions but mobilizing to manufacture them in a country that the climate cranks, weather bores and chemophobes have rendered direly hostile to manufacturing and chemical companies.

Also, the problem is the health care burden on infrastructure.

Paraphrasing Anton Waldman, giving numbers to a previous judgment from contrarian John Tamny at Forbes, we’re sacrificing trillions of dollars of wealth and income in order to avoid a few billions of dollars on new hospital facilities.

Wealth is actually knowledge, which is the answer to this crisis. And knowledge can accelerate during a crisis.

Technology, for example, rapidly accelerates during wartime. You might not want to, but just look at the atomic bomb.

This crisis will provide many opportunities to invest in the future. Remember, the Chinese character for crisis supposedly consists of danger and opportunity.

Perhaps the crisis will even lead the world back to sound money…

Today, under our perpetually growing government and bloated system of finance, we couldn’t imagine any economic solution for recovering from WWII other than more money manipulation to make it worse.

In our current economic morass, we appear hapless to recover from a dip in markets at all-time highs.

Under my theory, money is time made tangible. True prices are not the nominal paper printed by central banks but the number of hours it takes to earn the money to buy something.

When the Fed cranks out more money without a commensurate increase in production, it takes more time to buy the same goods.

In my book Life After Google, I show that the gold standard was essentially created by Isaac Newton in the early 18th century when he was master of the mint in Britain and when his alchemy proved that gold was “unhackable” from inferior metals.

It still is. And a return to a gold standard would replace the phony, debt-addicted system that’s currently breaking down before our eyes.

Regards,

George Gilder
for The Daily Reckoning

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It Could Last 18 Months — “or Longer”

This post It Could Last 18 Months — “or Longer” appeared first on Daily Reckoning.

547.5 days. 78.2 weeks. 18 months. “Or longer.”

That is how long the coronavirus scourge may endure. This we learn by way of The New York Times.

It has done us all a capital service by executing a rare feat of journalism.

For its spies have captured a government document “not for public distribution or release.”

From which:

A pandemic will last 18 months or longer and could include multiple waves of illness… Increasing COVID-19 suspected or confirmed cases in the U .S. will result in increased hospitalizations among at-risk individuals, straining the health care system… Supply chain and transportation impacts due to ongoing COVID-19 outbreak will likely result in significant shortages for government, private sector and individual U.S. consumers.

Potentially critical shortages may occur of medical supplies and staffing, due to illnesses among public health and medical workers, and potentially also due to exhaustion. SLTT governments (state, local, tribal and territorial), as well as health systems will be stressed and potentially less reliable. Health systems may run low on resources inhibiting the ability to make timely transitions between postures and maintenance of efficacy.

We are precious sick of the coronavirus after four days of home jailing.

How can any man withstand 18 months — “or longer”?

And how can the economy hold?

Consider one week of deadness upon the automobile industry. Reports auto man Eric Peters:

If people stop buying new cars for one week because dealers are forced to close shop – which has already happened in at least one state or because instantly unemployed people are no longer shopping for new cars it will cost the car industry $7.3 billion in earnings — and cost 94,400 Americans their jobs. It would also cost the government some $2 billion in taxes.

That’s one week. How about three months?

Indeed… how about 18 months?

We stagger and reel at the prospect.

Meantime, the National Restaurant Association — this organization has actual existence — projects its industry will shed “5–7 million jobs.”

We expect hotels and the tourist trade to withstand parallel holocausts.

In the immediate run…

JPMorgan’s primary U.S. economist, Michael Feroli by name, has hacksawed his second-quarter GDP forecast to a ghastly 14% drop.

The third and fourth quarters may yield a recovery. But that is far from certain if the virus remains amok.

And how about six entire quarters?

“If life doesn’t get back to normal for ‘18 months,’” argues catastrophist Michael Snyder, “we are going to witness a societal meltdown of epic proportions.”

More from whom:

If the entire world shut down for 30 days, this pandemic would quickly be brought under control. If only the U.S. shuts down, it is inevitable that the virus would keep coming back into the country as the pandemic continues raging elsewhere on the globe.

Of course we aren’t going to get the entire globe to agree to shut down simultaneously for 30 days.

So this outbreak will continue to spread and the case numbers will continue to grow.

It is a dismal mathematics.

Naturally the monetary and fiscal authorities are mobilizing on multiple fronts.

The Federal Reserve has executed the largest single market intervention in its hellish history. And the Department of Treasury is clearing for action.

The nation will plunge deeper and deeper into debt’s inky depths.

But how can it come up when chained down with so much debt?

The past 10 years offer high proof that debt does not translate to growth — not after a point, at least.

We may be articled off to prison for merely putting out this question. And the gallows after prison — and hell after the gallows…

But what if they allowed the economy and the stock market to go their own way?

Yes, the way would be down.

The going would be dreadful for a stretch. We will not pretend otherwise. Yet it would clear out much of the rot that presently infests us.

A new economy, strong and youthful and resilient, could come up from the rubble. And healthy shoots of growth could eventually grow into the towering oaks of tomorrow.

That is, what if the authorities did not do something… but merely stood there?

Regards,

Brian Maher
Managing editor, The Daily Reckoning

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“Hell Is Coming”

This post “Hell Is Coming” appeared first on Daily Reckoning.

We sense that we are among unrealities…

It is as if some hinge, deep within the national psychology, has suddenly given way.

The daily rites of life are suspended. Businesses, schools and arenas the nation over have gone dark. Travel is hopeless…. and borders are sealed shut.

Unemployment claims are piling up. Treasury Secretary Mnuchin has suggested they may ultimately scale a depression-level 20%.

San Francisco residents are under house arrest, confined to barracks 24 hours of the day. Emergencies and food shopping provide the only officially sanctioned furloughs.

(Our spies report large numbers of lawless who are flouting the ban.)

Rumors are on foot that other municipalities — New York City included — will follow.

USNS Comfort — a hospital ship — is presently plowing a course for New York Harbor, under presidential orders.

An identical vessel steams for the West Coast.

You Can’t Even Go to Church

Locally, a blanketing hush has fallen over the city of Baltimore. Residents have abandoned the streets. Dining and ale houses are shuttered.

Those who hazard a public appearance approach one another with suspicion… as if every stranger has a gun in his hand and murder on his mind.

Even the churches have suspended their Godly operations, their flocks scattered to the winds:

IMG 1

Even in wartime a fellow can take refuge in the comforting arms of God. But not when a pestilence is loose.

Yet the trees near our office are in blossom:

IMG 2

And old Washington keeps his reassuring watch over the city:

IMG 3

And we shall remain chained to our post… bound in solemn duty.

Three Years of Gains Wiped Out

The stock market went to the devil again today.

The Dow Jones slipped into the 18,000s today. It “recovered” to 19,899 by closing whistle… a 1,338-point loss on the day.

The S&P shed another 130 points; the Nasdaq 345.

Thus all market gains since Mr. Trump assumed his office are eliminated — three years of gains into the furnace.

“We’re only about halfway there,” hazards one trader. That of course being the bottom.

Gold, meantime, absorbed another slating today, down $30 and change.

But the 10-year Treasury yield went shooting in the other direction…

Yields vaulted 27% to 1.266%.

The reason is the promise of economic “stimulus” (more on which below).

The “Coronavirus Investment Summit”

Jim Rickards predicted the coronavirus scourge in early February, before markets caught the fever.

Wrote Jim in an email dated Feb. 5:

The real infection rate and death rate may be 10 times the official statistics… If you want to see how bad things can get, study the “Spanish flu” pandemic of 1918–20. Over 50 million dead.

And while the stock market was thundering down, Jim’s readers enjoyed the opportunity to nearly triple their money with one of his recommended trades — in one single day.

“Hell Is Coming”

We presently confront a springtime not of growth and life but of sickness and death.

And the carefree days of summer will likely yield to the careful days of summer… heavy with the mighty fear of a miniature bug.

The president — after all — let slip the other day that fortunes may only swing in August.

“Hell is coming,” shrieks Bill Ackman of Pershing Square Capital. He continued:

We need to shut it down now… This is the only answer… America will end as we know it. I’m sorry to say so, unless we take this option.

What precisely constitutes “this option”?

Chaining down the entire economy for 30 days. All gears of commerce must wind to a complete and immediate 30-day halt. More:

The hotel industry and the restaurant industry will go bankrupt first. Boeing is on the brink, Boeing will not survive without a government bailout… Capitalism does not work in an 18-month shutdown, capitalism can work in a 30-day shutdown…

Every hotel is going to be shut down in the country… If we allow this to continue the way we have allowed it to continue, every hotel company in the world is done. No business can survive a period of 18 months without revenue.

Will the president heed this fellow’s counsel?

“Wartime President”

Mr. Trump has now declared himself a “wartime president.”

And he has pledged to invoke the 1950 Defense Production Act (Pub.L. 81–774) — “in case we need it.”

The Defense Production Act is:

An Act to establish a system of priorities and allocations for materials and facilities, authorize the requisitioning thereof, provide financial assistance for expansion of productive capacity and supply, provide for price and wage stabilization, provide for the settlement of labor disputes, strengthen controls over credit and by these measures facilitate the production of goods and services necessary for the national security, and for other purposes.

“Other purposes,” of course.

From bull market to wartime economy within the space of one month — if you can believe it.

A journalist once asked British Prime Minister Harold Macmillan what could knock his plans off the course.

“Events, dear boy, events,” came his supposed response.

The president has been washed over by events.

Emergency Relief

Meantime, the administration proposes to write Americans checks — $500 billion worth in total.

The first would go in the mail April 6 — pending congressional approval of course. The second batch would go on May 18.

The specific amounts will depend upon a family’s income and number of children in residence.

“Millionaires,” we are told, are ineligible for relief.

Meantime, we are informed the Senate has the votes sufficient to expand paid leave and unemployment insurance.

The bill has already cleared the House of Representatives. Off it goes for the president’s signature once the Senate pushes it out.

But what will the rest of us purchase with the money we are to receive?

“The. Party. Is. Over.”

Our colleague Byron King laments we have “silent spring” on our hands, “courtesy of one too many imports from China.”

And the shelves may run thin by summer:

My maritime friends tell me that over the past two months, over 260 large cargo ships — 10,000–20,000 containers and more per each one — were canceled or sailed partly loaded (from China). Out of over 4 million containers that “should” have shipped, 2 million — about 50% — never made it.

What you see on the current shelves — the Chinese stuff — all showed up last fall and early winter. Looking ahead, those missing containers of Chinese goods will compound future shortages of all manner of things.

Expect to start seeing the effects in April, May and June.

Concludes Byron, with dreadful emphasis:

“The. Party. Is. Over.”

We hope he is mistaken. Yet we fear he is not.

We do not care one whit for this new America. Please, 1,000 times, please, return us to the former America — botched as it may have been.

But if our choices are reduced to death by coronavirus or death by hunger… we opt for the virus.

The end comes much faster.

Regards,

Brian Maher
Managing editor, The Daily Reckoning

The post “Hell Is Coming” appeared first on Daily Reckoning.