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> This will be blamed on COVID-19 Good. Because I don't buy for a moment that without COVID-19 the situation would be what it is now. Hindsight is 2020 and predictions of doom and stock market collapse is a dime a dozen.
I mean personally I think the whole opec thing has a little bit more weight behind it then corona.
This will be blamed on COVID-19, but the problems go much deeper. Last year the Fed lost control of the repo market. the event was widely discounted at the time as an end-of-tax-year fluke. It wasn't. Six month ago, the yield curve inverted. People who should have known better said "this time is different." Speculators have been trained over the course of 10+ years to buy the dip. The Fed has your back. What we're se…
Another way to put it is that Coronavirus is forcing people to realize that we’ve been papering-over weaknesses with easy money for quite some time. That said, “economists have predicted 5 out of the last 3 recessions” — people have been warning against one for years now. But the problem is that coronavirus is threatening the real “brick and mortar” economy — travel, restaurants, retail, etc. Its hard to address that…
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It is possible for interest rates to be negative. Not that I'm recommending that to happen!
Something that actually happened in Sweden! Although it seems like it's not like that anymore: https://www.thelocal.se/20191219/sweden-abandons-negative-in...
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This is widely being blamed on oil prices (edit: the virus would have been priced in last week to some extent, but the decision by Saudi Arabia to increase oil production happened over the weekend and hadn't been).
Oil prices going down is a good thing for the economy. I think people are confusing cause with an effect/correlation. Oil going down usually indicates a recession. Bad economy -> Lower demand for Oil -> Lower oil prices. In that case it's a signal/trailing indicator. In this case it's: Increased oil supply -> Lower oil prices -> Everything gets cheaper to make -> Increased economic activity
This will be blamed on COVID-19, but the problems go much deeper. Last year the Fed lost control of the repo market. the event was widely discounted at the time as an end-of-tax-year fluke. It wasn't. Six month ago, the yield curve inverted. People who should have known better said "this time is different." Speculators have been trained over the course of 10+ years to buy the dip. The Fed has your back. What we're se…
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The Fed has as much ammo as there is wealth held in dollars. Which is to say, a lot. First, there is negative rates. Punishing people for holding cash. The ECB and Bank of Japan have done a lot of pioneering work there, the Fed will have already extensively studied what they did, what worked, what didn't work. Second, they have QE, monetizing debt & debasing dollar wealth, which is exactly what they'll unleash for th…
I can practically just smell the inflation.
Then the Fed isn't out of ammunition.
The purpose of Fed easing would be precisely to generate/maintain target levels of inflation. The idea that the "Fed is out of ammunition" is that its conventional policy tool (rate changes) is seen as near a limit, such that the Fed can't generate further inflation if it wants to.
But here, you "smell the inflation," so by definition the contemplated actions are in fact ammunition.
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Correction is way overdue. Problem is, Fed has no ammo left with interest rates at near zero. We're in for rough days, people.
The Fed has as much ammo as there is wealth held in dollars. Which is to say, a lot. First, there is negative rates. Punishing people for holding cash. The ECB and Bank of Japan have done a lot of pioneering work there, the Fed will have already extensively studied what they did, what worked, what didn't work. Second, they have QE, monetizing debt & debasing dollar wealth, which is exactly what they'll unleash for th…
Second, they have QE, monetizing debt & debasing dollar wealth, which is exactly what they'll unleash for the next recession. Inflation isn't much of a concern right now, so they'll feel free to 'print' rather wildly.==
I'm not sure I see where either of these options has worked. Can you share the successes of either of these measures?
In option 1, you have a stagnant Japan with a lost generation.
Option 2, is what we have been doing for 12 years and has led us to this point. The inflation seems to be hiding in asset prices (housing, stocks) not household items.
Since 2007, there has been one year with GDP growth [1] above the annual deficit as % of GDP [2]. That was 2015, with 2.4% deficit and 2.9% GDP growth. 2018 saw the US spending 3.8% of GDP in deficits to generate 2.9% GDP growth. Does that sound like a "strong" economy?
[1] https://www.macrotrends.net/countries/USA/united-states/gdp-...
I wonder how different things would be if instead of those stepped halts, a super high granular delay is injected into the system. Like instead of halting, making it go on but in "slow-motion". And depending on the strength of the drop, the slow-motion factor to inject in the system. I say this because halting tries to "cool down" emotion but it still "feels like" panic while making it all go slow would "feel kind of…
I don't think so. Halting would allow the traders to get a cup of coffee and switch to another mental gear. A slowdown would probably just keep them in gear and result in a lot of anxious refreshes and attempts to wrestle the system.
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Another way to put it is that Coronavirus is forcing people to realize that we’ve been papering-over weaknesses with easy money for quite some time. That said, “economists have predicted 5 out of the last 3 recessions” — people have been warning against one for years now. But the problem is that coronavirus is threatening the real “brick and mortar” economy — travel, restaurants, retail, etc. Its hard to address that…
It would be interesting to see what percentage of student loans are serviced by brick and mortar retail, bar tending, barista, etc. types of gigs.
Check out the graphs presented, particularly the last one. Default is very likely for those most likely to have student loan debt (younger workers in lower quality service jobs), but there isn't a systemic risk as the federal government is the insurer of last resort. These are loans in name only; they are, in actuality, taxes you can't default on (or so was traditionally thought; we're making headway in having the ability to default on these obligations and get out from underneath them [1]).
[1] https://www.natlawreview.com/article/student-loan-discharged...
I don't know if it was a good bet but I moved all my 401k into money market accounts for the time being last Thursday. I feel like those who say I should ride the wave down are probably not telling me the truth. All indicators seem to suggest a 25% correction or more before the end of the year. I've been buying stocks heavily on the latest dips and so far that is all down around 20%. I diversified investments in crui…
And this second scenario happens more often to people than the first one (according to common wisdom).