On March 3, 2020, a Twitter user posted a message that claimed former New York City Mayor Michael Bloomberg could have given each American $1 million for the amount he spent on advertisements during his failed 2020 U.S. presidential candidacy:
The tweet reached a much larger audience a few days later when it was uncritically presented by MSNBC anchor Brian Williams and Mara Gay, a member of the The New York Times editorial board:
The problem, it seems to me, isn’t just that Williams and Gay made an arithmetical mistake; mistakes happen.
It’s that they didn’t have the basic math sense to realize that something was off. Agreeing with an assertion that $500 million split among 327 million Americans would be, say, $3 per person would be an arithmetical mistake; it shouldn’t be that hard to quickly realize that 500/327 is about 1.5 rather than about 3, but one can easily flub that.
But $1 million for each American should obviously be vastly more than $500 million. Likewise, $500 million split among 327 million should obviously be vastly less than $1 million. More broadly, just as a matter of common sense, given that the average American’s yearly income is somewhere under $100,000 (all of us should have a sense of that from ordinary life, even if we don’t know the exact number off the top of our heads), no one American is going to spend ten times the national GNP on a political campaign.
The point of basic numeracy, I think, isn’t that people should know their multiplication table or be able to do long division. It’s that people should have a rough understanding of numbers that they can drawn on in situations like this, to know what makes sense and what doesn’t. Sad to see that lacking here.
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Judge Orders Chelsea Manning Released From Jail Following Suicide Attempt
Chelsea Manning was ordered on Thursday to be released from jail, after a federal judge ruled that her testimony against WikiLeaks founder Julian Assange was no longer necessary. The decision comes one day after Manning reportedly attempted to commit suicide while in federal custody in Alexandria, VA.
Judge Anthony Trenga of the Eastern District of Virginia said that because the grand jury was finished deliberating, Manning’s testimony was no longer necessary – ending the former Army analyst’s incarceration which began last May after refusing to appear before the panel and testify against Assange.
Manning was convicted in 2013 of leaking US military secrets and sentenced to 35 years in military prison at Fort Leavenworth before her sentence was commuted in 2017. Assange, meanwhile, was indicted in 2018 on a federal charge of conspiring with Manning to assist in the transmission of U.S. state secrets to WikiLeaks.
For refusing to comply with the order to testify, Manning was hit with a $256,000 fine according to The Hill.
Manning’s publicist, Andy Stepanian, said on Wednesday that his client was recovering in a hospital after the suicide attempt.
Last month, Manning’s lawyers argued for her release on the grounds that detention was unlawfully punitive and served no purpose.
As Iran Nuclear Inspections Disrupted By Pandemic, Hawks Fear The Worst
US and Israeli hawks are worried Iran could use coronavirus pandemic fears and Western governments’ preoccupation with staving off the accompanying economic disaster to evade nuclear monitors and quickly ramp up weapons-grade uranium development.
International Atomic Energy Agency (IAEA) officials are already talking about dramatically increasing the UN nuclear watchdog’s remote monitoring capabilities, such as cameras and data monitors placed at key sites connected with Iranian nuclear power. Crucially the IAEA has online enrichment monitoring installed at some key nuclear locations throughout the country, such as at Natanz.
IAEA inspection team, file image via Asia News.
Some of these remote monitoring powers were established under the 2015 nuclear deal, but as coronavirus inside the Islamic Republic has begun impacting inspection teams directly, and also in many cases thwarting ability to inspect sites, officials want to see remote monitoring hugely increased.
Bloomberg reports on Thursday, “There’s concern that contact with carriers of the virus in Iran, where senior officials have been infected, could deplete the International Atomic Energy Agency’s roster of inspectors by forcing some into quarantine, according to two diplomats briefed on the matter who asked not to be identified.”
Andreas Persbo, a nuclear-verification specialist at the think tank European Leadership Network told Bloomberg: “At a time when the prevalence of coronavirus in Iran potentially makes life for inspectors more difficult, the redundancies built into the JCPOA become more valuable.” He added, “That’s particularly the case for online enrichment monitoring.”
The IAEA in conjunction with the US’ Oak Ridge National Laboratory previously developed unique online enrichment monitoring technology specifically for Iran as part of the JCPOA.
Patrick Air Force Base laboratory, which helps monitor and ensure international nuclear treaty compliance, via Florida Today.
However, it’s still in somewhat early usage and development, given that, “The gear was tested in July at Iran’s biggest uranium-enrichment facility in Natanz, after Iran raised uranium enrichment levels to 4.5% in response to renewed U.S. sanctions,” according to the Bloomberg report.
Officials confirmed the system worked exactly as expected and detected the breach. And now it’s seen as more urgent inside the country as ever, also given anti-Iran hawks in the West are growing increasingly anxious over further violations as the globe is distracted by the more immediately pressing pandemic.
In an attempt to quell market and banking fears about coronavirus-related downturns, the New York branch of the Federal Reserve announced new plans today:
For the monthly period beginning March 13, 2020 and continuing through April 13, 2020, the Desk will conduct purchases across a range of maturities….
Today, March 12, 2020, the Desk will offer $500 billion in a three-month repo operation at 1:30 pm ET that will settle on March 13, 2020. Tomorrow, the Desk will further offer $500 billion in a three-month repo operation and $500 billion in a one-month repo operation for same day settlement. Three-month and one-month repo operations for $500 billion will be offered on a weekly basis for the remainder of the monthly schedule. The Desk will continue to offer at least $175 billion in daily overnight repo operations and at least $45 billion in two-week term repo operations twice per week over this period.
These “repo operations” mean that the Federal Reserve will be providing liquidity in the form of cash in exchange for securities, which the entities getting the money are supposed to purchase back later.
For the past few months, the Fed has been on a $60 billion plan of securities purchases, but that was mostly just short-term Treasury bills. It is expanding those schemes, per its statement today, “to distribute reserve management purchases across eleven sectors, including nominal coupons, bills, Treasury Inflation-Protected Securities, and Floating Rate Notes.”
As the Wall Street Journal tallies, today’s “interventions lifted the overall amount of Fed temporary liquidity $119.1 billion to $361.5 billion, the most outstanding since the Fed began doing repos again in September after a decade-long break.” This is all in reaction to, as the New York Times reports, “reports from trading desks that many assets that are normally liquid—easy to buy and sell—were freezing up, with securities not trading widely. This was true of the bonds issued by municipalities and major corporations but, more curiously, also of Treasury bonds, normally the bedrock of the global financial system.”
In general this week, in everything from stocks to bonds, gold to crypto, the Times notes, “major financial players are experiencing a cash crunch, and are selling whatever they can as a result. That would help explain the seeming contradiction of assets that should go up in value in a time of economic peril instead falling in value.” That both stocks and bonds were falling this week put a big scare into the system.
Cynical populists might note that here, as so often, government’s quick big-money interventions seemed aimed more at comforting the wealthy and high-powered as opposed to easing the problems of the mass of low-income wage-earners, renters, or others who might be devastated by the shutdown in economic activity commensurate with the shutting down of most public gatherings that’s picking up speed this week.
That said, these repurchases function not as cash giveaways, but as loans that should be paid back. As CNBC explains, “Repos are short-term operations in which financial institutions provide high-quality collateral [in this case the wide variety of Treasuries and other securities] in exchange for cash reserves they use to operate.”
As Politico puts it, these new repos are meant to be “a crucial source of overnight funding for brokerage firms, hedge funds and other financial institutions.” The Fed hopes this new repo expansion will “ensure the proper functioning of the market for Treasuries, which influences all other credit markets.”
Scott Sumner of the Mercatus Center, who writes from a “market monetarist” perspective that roughly believes the Fed has been too tight in overall monetary policy since the 2008 crisis, says via email that today’s actions are “reactive, not proactive. Taken in isolation, they are probably beneficial. But the Fed needs to further ease monetary policy to assure that it achieves its policy goals, as set by Congress.”
At his blog, Sumner suggests bold moves for the Fed such as an instant end to paying interest on bank reserves, as that policy is contractionary at a time we don’t want contractionary monetary policy, and to straight-up purchase “as many Treasuries (and MBSs [morgage-backed securities]) right NOW as required to raised the expected price level two years from today to a level 4% higher than today. Not gradually; buy them NOW.” (Emphasis his.)
As Cato Institute monetary policy maven George Selgin says in an email today, despite the total amounts of money involved in the repos, it is properly seen as a series of “temporary short-term loan allotments [that] aren’t cumulative. It’s like me offering you $5 to be repaid next Thursday, and then offering to lend you the same amount then, and again the following week. At no point am I lending more than $5, and always for a short term.”
That said, Selgin also writes: “The question that remains to be answered is whether the Fed will also find it necessary to increase either the size or the duration of its ongoing, outright security purchases, which it so far plans to continue only through April. I should not be at all surprised to see an announcement sometime soon concerning such a decision.” Selgin’s larger-scale critique of the Fed’s ways of managing monetary policy over the past few years can be found here.
This means that any possible wind-down of assets the Fed owns since the quantitative easing days post-2008 crisis seems over. That failure to wind-down is criticized today from a Misesian perspective for “constantly favoring and bailing out bankers and other parts of the financial sector, [which means] the Fed has put all other sectors and industries at a disadvantage. As a nonfinancial enterprise, it’s hard to compete for investors and capital when the Fed has guaranteed that the financial sector will be bailed out no matter what.”
The Fed’s announcement had no immediate positive effects on stock market price plunges, with the Dow Jones Industrial Average down nearly 10 percent today.
For more background on the Fed’s asset holdings, see this 2014 Reason feature by Jeffrey Hummel, “How the Fed Got Huge,” assessing the economic dangers of the Federal Reserve being such a huge holder of financial assets.
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On March 3, 2020, a Twitter user posted a message that claimed former New York City Mayor Michael Bloomberg could have given each American $1 million for the amount he spent on advertisements during his failed 2020 U.S. presidential candidacy:
The tweet reached a much larger audience a few days later when it was uncritically presented by MSNBC anchor Brian Williams and Mara Gay, a member of the The New York Times editorial board:
The problem, it seems to me, isn’t just that Williams and Gay made an arithmetical mistake; mistakes happen.
It’s that they didn’t have the basic math sense to realize that something was off. Agreeing with an assertion that $500 million split among 327 million Americans would be, say, $3 per person would be an arithmetical mistake; it shouldn’t be that hard to quickly realize that 500/327 is about 1.5 rather than about 3, but one can easily flub that.
But $1 million for each American should obviously be vastly more than $500 million. Likewise, $500 million split among 327 million should obviously be vastly less than $1 million. More broadly, just as a matter of common sense, given that the average American’s yearly income is somewhere under $100,000 (all of us should have a sense of that from ordinary life, even if we don’t know the exact number off the top of our heads), no one American is going to spend ten times the national GNP on a political campaign.
The point of basic numeracy, I think, isn’t that people should know their multiplication table or be able to do long division. It’s that people should have a rough understanding of numbers that they can drawn on in situations like this, to know what makes sense and what doesn’t. Sad to see that lacking here.
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Italy Bans Short Sales, Blames Christine Lagarde For Stock Market Plunge
Four days after Italy’s former (and most likely future) prime minister, Matteo Salvini called for a short selling ban (referencing none other than George Soros who “built his fortune betting against Italy”) on Italian stocks, Italy’s market regulator, Consob, announced that short-selling would indeed be banned on Friday, March 13, with the temporary ban applying to 85 companies listed on Milan stock exchange.
Ironically, just two days ago, the head of Italy’s bourse, Raffaele Jerusalmi, said that a ban on short selling to deal with market reactions to the coronavirus outbreak would be useful only if applied at a European or broader level and for specific sectors.
“If there were sectors particularly at risk, an intervention by the regulatory authorities could be useful,” Raffaele Jerusalmi said in a streamed interview with Il Sole 24 Ore.
And to think all it took to change his mind was a 20% drop in the Italian stock market in the next two days.
And with Italy getting increasingly sensitive about its crashing market, there was an amusing development earlier, when the country’s Economic Development Minister Stefano Patuanelli said in an interview that ECB President Christine Lagarde caused the biggest stock market drop in Italy with her comments at the ECB press conference.
The minister added that he hopes her words were an accident referring to Lagarde’s comment that the ECB is “not here to close spreads”, because apparently so used are the Italians to central banks that do close spreads (especially when they are headed by other Italians-cum-former Goldmanites), that if anyone refuses to explicitly backstop Italy’s risk assets, they are an enemy of the state.
And it’s not just Italy: late on Thursday, Spain’s Regulator also set a one-day short-sale ban on 69 stocks that fell more than certain amounts Thursday.
Finally, what none of the regulators appear to know is that banning short sales in a time of crisis does two things: i) it makes the liquidation period more painful and more drawn out, and ii) it results in an even greater drawdown when all is said and done, something the US learned in the depths of the financial crisis when the SEC did exactly the same thing, only to unleash another 30% of selling before the market stabilized around a “generational” low of 666. And come to think of it, it is now another generation’s turn to retest said low.
Large Scale US Airstrikes Underway Against Iran-Backed Militias In Iraq
After earlier in the day President Trump authorized the Pentagon to “do what we need to do” in terms of a military response against Iran-backed militias believed responsible for Wednesday’s rocket attacks on Camp Taji, which killed one British and two American soldiers, and wounded at least a dozen more, there are widespread reports the US has initiated massive airstrikes over southern Iraq late Thursday night.
A BBC correspondent in the region is describing “multiple strikes across Iran-backed groups’ facilities” which include “logistics and drone warehouses.”
Early reports suggest the attack includes “large amounts of munitions” on multiple Iraqi Shia militia targets. Moments after initial reports on social media US defense offcials confirmed that “airstrikes are underway against Iran-backed militia group that hit Iraq base,” according to the Associated Press.
Bombing #Iran-backed paramilitary group positions around #Karbala and #Salahaddin is significant. This is the largest amount of force I’ve seen against Hashd (#PMF) so far. These areas are considered “No fly zones” for #Coalition. Jets may have come from #UAE or #Kuwait
As if the Mideast region and the world for that matter needs another crisis to worry about, this could be the start of the kind of tit-for-tat between the US and Iran which paved the way for the US killing by drone of IRGC Quds Force chief Qassem Soleimani on January 3rd. Since then, the two have been on a war footing.
Defense Secretary Mark Esper hours ago warned the US would hold the groups behind Wednesday’s attack on Taji base accountable. “You don’t get to shoot at our bases and kill and wound Americans and get away with it,” he said earlier.
The US response will be “proportional” targeting multiple locations used by Iranian backed Shia militias across Iraq and along Syrian border.
Will be limited to airstrikes: source. Will degrade Shia militia/ Kata’eb Hezbollah ability to strike: US military source.
#BREAKING
-U.S. military confirming airstrikes
-Iraqi activists reporting warplanes flying over multiple provinces of Iraq, including Salahadin, Baghdad, Anbar, Babil, Karbala
-Video of Jurf Sakharpic.twitter.com/xCDZsR2DSL
The US has said Kata’eb Hezbollah is responsible, given it’s “the only group known to have previously conducted an indirect fire attack of this scale against U.S. and coalition forces in Iraq.” The major attack had utilized at least 15 Soviet-era rocket artillery and further left a dozen wounded.
A top Pentagon general also said earlier the Iran-backed militias were to blame and that the US can identify the culprit with a “high degree of certainty”.
Gun Sales Soar Among Asian-Americans After Virus-Related Attacks
The threat of Covid-19 hate crimes across the country is surging this week as Asian Americans in San Gabriel Valley, a region east of Los Angeles, are loading up on weapons as concerns they could be targeted.
CBS Los Angeles reported this week that gun sales among Asians are rising in San Gabriel Valley as they believe the pandemic could trigger hate crimes against them.
David Liu, the owner of Arcadia Firearm & Safety, said gun sales have jumped in the last two weeks as the virus crisis worsens in California.
“Because of coronavirus, a lot of people start to worry,” Liu said.
CBS Los Angeles said there’s a high concentration of Asians near the Arcadia gun store. Liu said many of his customers are stocking up on weapons because they fear they might be targeted because of their ethnicity if a local virus outbreak is to occur.
“I do worry,” said Daniel Lim, who recently bought a gun and ammo for his wife at Arcadia.
Lim said he bought the gun to defend his family amid fears the virus could crash the stock market and economy and lead to massive social unrest where Asians would be targeted. “I hope and pray it never happens,” he said.
Lim isn’t the only Asian American in the community, thinking that a purge is coming if the virus crisis gets out of hand. “We think it’s the perfect time to get a weapon for ourselves,” said another Arcadia customer, Dirk Zhang, adding that his wife would never allow a gun in the house until now.
“She’s a little afraid of the outbreak of the virus,” he said.
As confirmed virus cases are expected to be in the thousands in the weeks ahead, coronavirus anxiety is sweeping the country and could lead to social destabilization. Asians in California are preparing for a purge, and they’re now loading up on weapons as hate crime fears increase.
JPMorgan Capitulates: “One Could Perhaps Pedantically Argue That This Is QE”
We were right again.
On Jan 24, we wrote an article titled “The Debate Is Over: In Two Months “Not QE” Officially Becomes QE 4,” in which we wrote that by the March 18 FOMC meeting, “the Fed will need to reduce its “demand burden” on the bill market, i.e., there won’t be enough Bills available for the Fed to monetize without it distorting the market, and will extend the purchase program to include short coupons in the process officially ending any debate whether the Fed’s manipulation of the market under the guise of saving repo, is “Not QE”, because it is limited to Bills and thus no duration is taken out of the market, or is “QE 4″, in which the Fed purchases at least some coupon securities in addition to Bills.”
Not only were we right, but the transformation from Not QE to QE-4 (or QE-5, depending on how one counts), took place one week ahead of the FOMC meeting, when today as part of its massive, $1.5 trillion (with a maximum capacity of $5 trillion per month) bazooka in response to the bizarro moves in the Treasury market, the Fed announced that it would – as we predicted – expand its POMO from just Bills to all securities across the fixed income spectrum, including Treasury Inflation-Protected Securities, Floating Rate Notes and, you guessed it, nominal coupons.
And just like that Not QE has become QE-4, as even JPMorgan – which for the longest time was arguing to anyone who bothered to listen that Not QE is not QE 4 and would not become QE 4 – was forced to admit today.
Here is JPM’s Michael Feroli admitting “since today’s announcement moves those purchases further out the curve one could perhaps pedantically argue that this is QE.” Those damn pedants.
This afternoon the Fed took two liquidity measures to support financial market functioning. The first was to redistribute its current $60 billion a month reserve management purchases of T-bills across the curve (including TIPS and FRNs) over the next month. The second was to conduct three $500 billion tranches of term repos (two for 3-months, one for 1-month) today and tomorrow. These actions were taken to address dislocations in funding markets that were impairing Treasury market functioning.
These actions are not designed to provide further economic stimulus. If the Fed wanted to provide such stimulus then it would have lowered the federal funds rate from its current 1.0%-1.25% target range. Whereas the Fed’s bill purchases were clearly not QE, since today’s announcement moves those purchases further out the curve one could perhaps pedantically argue that this is QE. Even if one bought this argument, the total size of purchases—$60 billion—is trivial compared to each of the Fed’s large-scale asset purchases.
Moreover, it would be inaccurate to describe the $1.5 trillion in repo operations as “money pumped into the system” as it is a temporary swap of reserves for government securities which will be unwound in one or three months’ time. We may well be approaching the point when the Fed turns to genuine QE (or large-scale asset purchases), but that won’t happen until the Fed sets the funds rate to zero, which should be next Wednesday at the latest.
Transaltion – the head JPM economist was wrong again, but we will give him some credit: Feroli – whose firm was pushing his clients into stocks as recently as two days ago – is right about one thing: genuine QE, or whatever the “non-pedants” want to call it, is coming as soon as next week, and if Yellen has her way and she will, – it will also include stocks and ETFs.
Is the planet under the spell of a pair of black swans – a Wall Street meltdown, caused by an alleged oil war between Russia and the House of Saud, plus the uncontrolled spread of Covid-19 – leading to an all-out “cross-asset pandemonium” as billed by Nomura?
Or, as German analyst Peter Spengler suggests, whatever the averted climax in the Strait of Hormuz has not brought about so far “might now come through market forces”?
Let’s start with what really happened after five hours of relatively polite discussions last Friday in Vienna. What turned into a de facto OPEC+ meltdown was quite the game-changing plot twist.
OPEC+ includes Russia, Kazakhstan and Azerbaijan. Essentially, after enduring years of OPEC price-fixing – the result of relentless US pressure over Saudi Arabia – while patiently rebuilding its foreign exchange reserves,Moscow saw the perfect window of opportunity to strike, targeting the US shale industry.
Shares of some of these US producers plunged as much as 50% on “Black Monday.” They simply cannot survive with a barrel of oil in the $30s – and that’s where this is going. After all these companies are drowning in debt.
A $30 barrel of oil has to be seen as a precious gift/stimulus package for a global economy in turmoil – especially from the point of view of oil importers and consumers. This is what Russia made possible.
And the stimulus may last for a while. Russia’s National Wealth Fund has made it clear it has enough reserves (over $150 billion) to cover a budget deficit from six to ten years – even with oil at $25 a barrel. Goldman Sachs has already gamed a possible Brent crude at $20 a barrel.
As Persian Gulf traders stress, the key to what is perceived in the US as an “oil war” between Moscow and Riyadh is mostly about derivatives. Essentially, banks won’t be able to pay those speculators who hold derivative insurance against a steep decline in the price of oil. Added stress comes from traders panicking with Covid-19 spreading across nations that are visibly unprepared to deal with it.
Watch the Russian game
Moscow must have gamed beforehand that Russian stocks traded in London – such as Gazprom, Rosneft, Novatek and Gazprom Neft – would collapse. According to Lukoil’s co-owner Leonid Fedun, Russia may lose up to $150 million a day from now on. The question is for how long this will be acceptable.
Still, from the beginning Rosneft’s position was that for Russia, the deal with OPEC+ was “meaningless” and only “cleared the way” for American shale oil.
The consensus among Russian energy giants was that the current market setup – massive “negative oil demand,”positive “supply shock” and no swing producer – inevitably had to crash the price of oil. They were watching, helplessly, as the US was already selling oil for a lower price than OPEC.
Moscow’s move against the US fracking industry was payback for the Trump administration messing with Nord Stream 2. The inevitable, steep devaluation of the ruble was gamed.
Still, what happened post-Vienna essentially has little to do with a Russia-Saudi trade war. The Russian Energy Ministry is phlegmatic: Move on, nothing to see here. Riyadh, significantly, has been emitting signs the OPEC+ deal may be back in the cards in the near future. A feasible scenario is that this sort of shock therapy will go on until 2022, and then Russia and OPEC will be back to the table to work out a new deal.
There are no definitive numbers, but the oil market accounts for less than 10% of Russia’s GDP (it used to be 16% in 2012). Iran’s oil exports in 2019 plunged by a whopping 70 %, and still Tehran was able to adapt. Yet oil accounts for over 50% of Saudi GDP. Riyadh needs oil at no less than $85 a barrel to pay its bills. The 2020 budget, with crude priced at $62-63 a barrel, still has a $ 50 billion deficit.
Aramco says it will be offering no fewer than 300,000 barrels of oil a day beyond its “maximum sustained capacity” starting April 1. It says it will be able to produce a whopping 12.3 million barrels a day.
Persian Gulf traders say openly that this is unsustainable. It is. But the House of Saud, in desperation, will be digging into its strategic reserves to dump as much crude as possible as soon as possible – and keep the price war full tilt. The (oily) irony is that the top price war victims are an industry belonging to the American protector.
Saudi-occupied Arabia is a mess. King Salman is in a coma. Every grain of sand in the Nefud desert knows Jared of Arabia Kushner’s whatsapp pal MBS has been de facto ruler for the past five years, but the timing of his new purge in Riyadh speaks volumes. Princes Mohammed bin Nayef, the king’s nephew, and Ahmed bin Abdulaziz, his younger brother, are now really in detention.
The CIA is fuming: Nayef was and remains Langley’s top asset. When Saudi regime spin denounced “Americans” as partners in a possible coup against MBS, that word needed to be read as “CIA.” It’s just a matter of time before the US Deep State, in conjunction with disgruntled National Guard elements, comes for MBS’s head – even as he articulates taking over total power before the G-20 in Riyadh next November.
Black Hawk down?
So what happens next? Amid a tsunami of scenarios, from New York to all points Asia, the most optimistic say that China is about to win the “people’s war” against Covid-19 – and the latest figures confirm it. In this case, global oil demand may increase by at least 480,000 barrels a day.
Well, that’s way more complicated.
The game now points to a confluence of Wall Street in panic; Covid-19 mass hysteria; lingering, myriad aftershocks of Trump’s global trade mess; the US election circus; total political instability in Europe. These interlocked crises do spell Perfect Storm. Yet the market angle is easily explained: that may be the beginning of the end of Wall Street artificially inflated by tens of trillions of US dollars pumped by the Fed through quantitative easings and repos since 2008. Call it the calling of the central bankers’ bluff.
A case can be made that the current financial panic will only subside when the ultimate black swan – Covid-19 – is contained. Borrowing from the famous Hollywood adage, “No one knows anything,” all bets are off. Amid thick fog, and discounting the usual amount of disinformation, a Rabobank analyst, among others, came up with four plausible Covid-19 scenarios. He now reckons it’s getting “ugly” and the fourth scenario – the “unthinkable” – is not far-fetched anymore.
This implies a global economic crisis of, yes, unthinkable magnitude.
To a great extent it will all depend on how fast China – the inescapable crucial link in the global just-in-time supply chain – gets back to a new normal, offsetting interminable weeks of serial lockdowns.
Despised, discriminated against, demonized 24/7 by the “system leader,” China has gone full Nietzsche – about to prove that whatever does not kill you makes you stronger when it comes to a “people’s war” against Covid-19. On the US front, there’s scant hope that the gleaming Black “helicopter money” Hawk will crash down for good. The ultimate Black Swan will have the last word.
