{"id":1173735,"date":"2020-03-23T08:05:37","date_gmt":"2020-03-23T14:05:37","guid":{"rendered":"https:\/\/dailyreckoning.com\/?p=109172"},"modified":"2020-03-23T08:05:37","modified_gmt":"2020-03-23T14:05:37","slug":"rickards-itll-get-worse-it-before-it-gets-better","status":"publish","type":"post","link":"https:\/\/juniorminingnews.com\/?p=1173735","title":{"rendered":"Rickards: It\u2019ll Get Worse it Before It Gets Better"},"content":{"rendered":"

This post Rickards: It\u2019ll Get Worse it Before It Gets Better<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n

We\u2019re well into the coronavirus pandemic at this point. As of this writing, there are 360,765 reported infections and 15,491 deaths worldwide.<\/p>\n

Over the next few days, you may be certain that those numbers will be significantly higher.<\/p>\n

That\u2019s how pandemics work. The cases and fatalities don\u2019t grow in a linear fashion; they grow exponentially.<\/p>\n

It\u2019s widely acknowledged that this pandemic will get much worse before it gets better. There\u2019s no doubt about that.<\/p>\n

It didn\u2019t take long for the coronavirus crisis to turn into an economic and financial crisis.<\/p>\n

The Worst Collapse Since the Great Depression<\/b><\/h2>\n

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\u201301 and worse than the Great Recession and global financial crisis of 2008\u201309.<\/p>\n

Don\u2019t 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.<\/p>\n

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.<\/p>\n

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\u2019s just a timing difference; the sale is not permanently lost.<\/p>\n

But if I don\u2019t go out for dinner tonight and then do go out a month from now, I\u2019m not going to order two dinners. The skipped dinner is a permanent loss.<\/p>\n

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.<\/p>\n

More important is the question of whether growth returns to trend by next year or follows a new lower trend. (Bear in mind that \u201ctrend\u201d 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.)<\/p>\n

This is unknown, but the result will be as much psychological as policy driven.<\/p>\n

The Fed\u2019s Bazooka Is Empty<\/b><\/h2>\n

In situations like this, the standard policy response is for the Fed to cut rates, which it has certainly done.<\/p>\n

The Fed has also launched massive amounts of quantitative easing.<\/p>\n

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.<\/p>\n

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.<\/p>\n

The problem is that the Fed\u2019s programs won\u2019t work as a form of stimulus. We\u2019re seeing a supply shock as the economy grinds to a standstill. What\u2019s everyone going to buy with all the money?<\/p>\n

Still, they may have done things exactly backward.<\/p>\n

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.<\/p>\n

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\u2019t provide stimulus).<\/p>\n

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\u2019s bazooka is empty at the worst possible time.<\/p>\n

No Stimulus Bill<\/b><\/h2>\n

Meanwhile, Congress is working to pass a \u201cstimulus\u201d bill to fight the economic effects of the coronavirus pandemic.<\/p>\n

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.<\/p>\n

“Democrats won\u2019t let us fund hospitals or save small businesses unless they get to dust off the Green New Deal,” said Senate Majority Leader Mitch McConnell.<\/p>\n

Once again, I need to emphasize the point: The economic impact of coronavirus could be devastating.<\/p>\n

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.<\/p>\n

The bottom line is that these spending bills provide spending but they do not provide stimulus. That\u2019s up to consumers. And right now consumers are hunkered down.<\/p>\n

It may be that the last of the big spenders just left town.<\/p>\n

Gold Roars $75<\/b><\/h2>\n

Markets were down again today, what a surprise. The Dow lost another 600 points, finishing the day at 18,591.<\/p>\n

Meanwhile, gold was up about $75 today. Physical supply is drying up and dealers are running out.<\/p>\n

That\u2019s why I\u2019ve been warning my readers for years to get their gold before the crisis hits. Once it does (and it has), you won\u2019t be able to get any.<\/p>\n

What about silver?<\/p>\n

You Should Get a \u201cMonster Box\u201d<\/b><\/h2>\n

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.<\/p>\n

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.<\/p>\n

The 500 coins at retailer commission will run you about $12,000 right now, but everybody should have one.<\/p>\n

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\u2019t work and neither will credit cards.<\/p>\n

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

Believe me, that’ll be legal tender when the time comes, so I definitely recommend silver.<\/p>\n

Regards,<\/p>\n

Jim Rickards
\nfor The Daily Reckoning<\/i><\/p>\n

The post Rickards: It\u2019ll Get Worse it Before It Gets Better<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

This post Rickards: It’ll Get Worse it Before It Gets Better<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n

“It’s widely acknowledged that this pandemic will get much worse before it gets better”…<\/p>\n

The post Rickards: It’ll Get Worse it Before It Gets Better<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n","protected":false},"author":14,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"footnotes":""},"categories":[3884,3724,366,656,465,805,4074,462,463],"tags":[],"_links":{"self":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1173735"}],"collection":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/users\/14"}],"replies":[{"embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1173735"}],"version-history":[{"count":1,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1173735\/revisions"}],"predecessor-version":[{"id":1173736,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1173735\/revisions\/1173736"}],"wp:attachment":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1173735"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1173735"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1173735"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}