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Authored by James Rickards via The 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.

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?

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.

Social distancing is transforming society as we know it. City dwellers are packing up their bags and are heading for the mountains amid the virus crisis.  

“Overnight, the world took a sharp turn into the Twilight Zone,” Gina Grande told the Los Angeles Times. “I had to get out of there. So, I made a beeline to my boss’ office and said, ‘This is awkward, but can I please telecommute from Southern California?'” 

Grande, terrified of the fast-spreading COVID-19 outbreak in San Francisco, which is where she works and lives, left the metro area for her second home on the outskirts of Joshua Tree National Park, a desert area located in southern California. 

As the pandemic sweeps across California’s largest cities, residents are fleeing their urban settings to isolated communities in the Mojave Desert or the rugged Sierra Nevada. The hope is that a remote area can reduce their transmission risk. 

But for some, social distancing measures enforced by the government have not just limited their mobility to and from work and or even their ability to go outside, residents in Los Angeles last week were restricted from leaving the city to vacation homes. 

In Mammoth Lakes, a town in California’s Sierra Nevada mountains, banned non-residents because infection risk in the small community would quickly overwhelm their hospital system. 

The flight from cities to rural communities during the outbreak, ignited by fear, could be the next hottest trend for real estate that revives dying suburbs. Families, who’ve been subjected to chaos at Costco stores of panic hoarding or forced quarantine in their tiny 550 square-foot studios, want the freedom of rural communities and the security of land that could power them through any crisis. 

In Joshua Tree, vacation rental companies have said concerned families from large metro areas are renting short-term rentals for weeks and or months at a time following the virus outbreak. 

“We just confirmed two rentals for long-term stays over three weeks,” said Josh Sonntag, who operates several rental units in the area. “In both cases, social distancing and the ability to work remotely was important.”

Bryan Wynwood, the owner of Joshua Tree Modern Real Estate, said, “Every call I get is related to the coronavirus. Some of them are from city dwellers worried about being stuck in the center of a metropolis that loses control of its basic public services.”

Sam Steinman, 28, owns several short-term rentals in Joshua Tree, said he’d noticed the desperation in city dwellers’ voices who are willing to pay double for his properties to escape the outbreak in large cities. 

“I’ve seen this kind of fear and desperation before in Israel during rocket attacks,” Steinman said. “A friend recently asked if I had a gun he could borrow. I said absolutely not.”

And maybe, just maybe, COVID-19 will have a long-lasting impact on choices made by city dwellers, who have just realized their entire lives can come crashing down in a public health crisis – though, some are making a mad dash to remote areas where life goes on as usual. 

A noticeable trend is developing: A revival of dying suburbs could be on the horizon as cities are just too dangerous when everything goes to sh*t. 

If you’re looking to flee a metro area, not just because of a virus crisis, but also because housing prices in cities are due for a major correction, here are some affordable suburbs in America that you might find interesting.

Via SchiffGold.com,

March 23 was Peter Schiff’s birthday. It was also the day the Federal Reserve announced QE Infinity. So, Peter spent over three hours hosting a live videocast talking about the latest Fed moves, the potential impact on the economy and answering questions from viewers.

Peter said he was hoping to combat the rampant economic ignorance that is pretty much everywhere.

There’s probably one thing that is spreading right now throughout the country faster than the coronavirus and that is economic ignorance and misinformation. It’s all over the place. It’s gone completely viral … The best thing anybody can do to combat the virus of ignorance is to turn off their television sets or their computers and don’t listen to anything that is being said in conventional media, whether it’s a news-related channel or a financial channel, I can virtually assure you that every single thing that you’re hearing is wrong.”

Peter hammered on a number of central themes you won’t hear discussed in the mainstream. For one thing, the Federal Reserve and the US government are repeating the mistakes of 2008.

Peter reminds us that as the crisis unfolded in ’08, he warned that the policies of bailouts and monetary stimulus were a mistake and that they would lead to a bigger crisis in the future.

Well, welcome to the future.”

He also emphasized that this isn’t about the coronavirus. The virus pricked a bubble that was inflated long ago. The economic chaos we’re seeing today started long before the virus reared its ugly head.

Everybody wants us to go back to normal, the way things were before anybody heard the word coronavirus of COVID-19. But you know what? We weren’t normal back then. The economy was sick before the virus infected us. It was a bubble. There was nothing normal about that bubble. And the problem with bubbles is once they pop, they’re not going to reflate. You need a new bubble. You need a bigger bubble. That’s what the Fed did. They inflated the NASDAQ bubble. That popped. They inflated a bigger bubble in housing. That popped. And then they inflated a bubble in everything. Well, everything has already been in a bubble. There’s nothing left to bubble up. It’s over.”

Peter also warned about what’s coming down the pike with all of this money being injected into the economy.

They are going to unleash a tsunami of inflation.”

And people losing their money in this crisis is going to be the least of the problems.

What we’re going to suffer as an economy is far worse than losing your money. Because you know what’s worse than losing your money? Having your money but your money losing it’s purchasing power. That is the worst thing that can happen and that is what’s going to happen. Hyperinflation has gone from the worst-case scenario to the most probable scenario. And that means people have to act quickly to protect themselves.”

Peter spent a lot of time taking questions from viewers. This is a great opportunity to get some economic analysis you’re not going to see on CNBC or Fox Business.

For the longest time, private equity firms seemed like the perfect investment in this market climate: unlike public equity, PE valuations would seemingly increase year after year, and without drawdowns and with no volatility, PE provided an island of stability in a market that was getting increasingly jittery even as stocks hit all time highs. Sure, unlike stocks, PE had virtually no liquidity and carried multi-year lockups, and their portfolio company purchase multiples were absolutely idiotic…

… but why would that matter in a market that seemingly would only go up?

Well, as the events of the past month demonstrated vividly, boy does liquidity and leverage matter. And so, with the US entering a depression, all those pristine PE returns are about to be savaged, the only question is by how much.

The answer – according to a new report from Investec, PE is about to go through a period of violent repricing matched only by the collapse in the global financial crisis: some 50% over the next 3 months!

In the report from Investec’s Fund Finance team, authors Michael Zornitta and Ian Wiese write that valuations will fall this month, with “major adjustments” downward foreseen in June reporting, and that hedging transactions are on the rise as risk management becomes the priority for fund managers. Just one problem: one hedges before the crisis, not after.

“Almost all managers have shifted their focus from deploying capital to defending assets,” Zornitta and Wiese wrote. Managers are looking into “alternative forms of liquidity to prop up companies, prevent breaches and reduce the possibility of having to call any remaining capital” from investors, they wrote.

Ironically, after PE firms were playing down liquidity for much of the past decade, the vital importance of liquidity during the Global Coronavirus Crisis has been underscored by none of the than PE giants Blackstone Group and Carlyle Group which told their portfolio companies to tap bank credit lines and preserve cash. In Europe CVC, EQT and Permira have also urged some companies they own to draw down credit facilities to prevent liquidity crunches if economic prospects worsen.

Apollo Global is one of the few firms that has revealed the impact of the outbreak on its funds so far. It expects to mark down its private equity portfolio by 15% to a “low 20%” figure in the first quarter, Bloomberg reported.

“The next few months will be defining for the industry,” Zornitta and Wiese said. “Defending value and ensuring there is sufficient liquidity will be the name of the game,” which is ironic for an industry that demands its investors accept no liquidity for many years at a time.

So what about all those tens of billions in private equity dry powder, with PE funds furiously raising capital in recent years? Well, as the Friendly Bear said, “it’s a good thing PE has so much “dry powder” – with leverage at 6x EBITDA on average, much of that dry powder will be going into bailing out existing companies…and it would be a good time to ask sponsors what exactly they have been including in “EBITDA”.” A very good time indeed.

Once the reality of the coronavirus outbreak finally started to sink in across the US, hundreds of thousands of wealthy Americans with the means to do so decided to get the hell out of Dodge, and bolted to their “summer homes” in less densely-populated places like the Hamptons and Kennebunkport.

Traveling by plane, or by train or by road, depending on the options available at the time, city slickers fled to the country, but many didn’t really think it through, because instead of being somewhere safer and less densely populated, they’re now all crammed on to these tiny islands like Martha’s Vineyard, where medical resources are much more scarce than in well-populated suburbs.

As the Washington Post reports, in recent weeks, wealthy city dwellers escaping to the country have been aggravating longstanding tensions between the year-round locals and the seasonal community. While those from out of town feel they have the right to use property that they own and pay taxes on, locals worry they might be carrying disease.

Adding another layer of irony to the whole affair, a popular meme has surfaced featuring the mayor from the fictional Cape Cod town portrayed in the movie “Jaws”.

On the real-life Cape Cod, Facebook groups intended to connect Cape Cod residents devolved into embittered name-calling and demands to close the bridges to the mainland to cut off the parade of weekend warriors and wealthy seasonal residents. Police in Block Island, Rhode Island, received tips that a gang of residents was preparing to destroy the island’s main power transformers to discourage visitors.

Finally, on the small island of North Haven, Maine, the town voted to ban its own part-time residents.

Door County, a popular summer destination for urbane WIsconsinites and other Midwesterners, has asked seasonal residents to stay away. In a statement, Door County, though it has zero confirmed cases of the virus, warned that an influx of seasonal residents could risk spreading the virus and overwhelming the town’s emergency services.

“Due to high community transmission in certain area of the state and across the nation, Door County Public Health is recommending that you stay in your permanent home area if you have a seasonal or second home in Door County. Door County has well trained and capable medical personnel, but staffing is limited and stretched thin during this emergency. We make this statement in hopes of limiting the demands placed on local hospitals, emergency personnel, nurses and doctors People who have seasonal homes in Door County, please stay at your winter homes at this time. If you are already back in Door County you are encouraged to self-quarantine for fourteen days.

“Door County has a large population of older adults and others who are identified to have a higher risk of serious complications from COVID-19. It is our top priority to keep people in Door County healthy and safe. On March 17, 2020, the Door County Board of Supervisors issued a countywide COVID-19 Emergency Declaration. Please be aware that additional health and travel restrictions may be imposed during this time.”

But with millions of students essentially out of school for the year, it appears summer vacation has come early. Several governors, including Massachusetts Gov. Charlie Baker, and New York Gov. Andrew Cuomo, have advised residents to stay at their primary residences.

Phil Murphy, the governor of New Jersey, warned those with cabins “down the shore” (the Jersey shore) to stay in town.