— From “La Peste” by Albert Camus
SALTA, ARGENTINA — How quickly the sun sets. It was just a few weeks ago that we were enjoying the bright light of a benevolent world.
Federal Reserve chief Jay Powell told the world that the U.S. economy was “in a good place.” Donald Trump told us that the economy had never been better.
And look at it now.
Over the past few days, the stock market crashed as bad as it did in 1929. And serious epidemiologists are projecting more deaths from the coronavirus than WWII and the Civil War put together.
The virus can’t be stopped. But it can be slowed. That gives doctors and nurses time to prepare… and treat new cases effectively as they occur.
“Distance yourselves…” is the advice coming from doctors. Stay at home. Avoid crowds. Don’t travel. And keep at least six feet between you and anyone who might be infected.
Only 1 to 4% of those who get the ailment die; usually the oldest ones. So about 96% of people should be relieved if we get sick; statistically, we’ll fill the death quota.
Meanwhile, the markets sold off immediately after Donald Trump’s speech on Wednesday night. By Thursday morning, the Dow was down 1,000. By midday, it was down 2,000.
Gradually, two things are becoming clear:
- The coronavirus is a killer. Between 1 million and 18 million will probably die worldwide, say the epidemiologists. The wide difference, they say, depends on how effective the authorities are at slowing it down.
- The economy’s immune system has been compromised by fake money and fake credit. The only way to keep this scam going is to give it massive doses of more fake money and fake credit.
Yes, Dear Reader, the economic disaster can’t be stopped, either. But it can be stretched out… disguised… delayed… denied… and ultimately made worse.
Inflate AND Die.
Too Little, Too Late?
The European Central Bank fell short Thursday. It promised “stimulus.” But it failed to deliver enough to offset the downdraft caused by oil and bugs.
Investors dumped Europe’s bonds and stocks after Christine Lagarde did little to show that the region’s central bank can stop economies from sliding into recession.
European stocks tumbled the most on record… and the euro headed for its worst three-day drop since 2016.
Then, in the U.S., the same story.
We watched the tape as it suddenly reversed around 1 p.m. Thursday… erasing about 1,000 points of the loss in a 20-minute period.
“What’s going on?” we wondered.
Then, we saw the news. The Fed was juicing the market. Yahoo Finance:
The Federal Reserve has launched an over $1 trillion liquidity operation to support money markets amid the new coronavirus outbreak, and is now one step closer to resuming its crisis-era policy of purchasing assets in a process called quantitative easing.
The liquidity is being offered through temporary repurchase agreement operations based out of the Federal Reserve Bank of New York.
But after a few minutes, investors had a chance to reconsider. Too little, too late? The wrong thing at the wrong time? More claptrap stimulus? The sell-off resumed.
Stocks plunged again Thursday even after the Federal Reserve announced extraordinary funding actions of more than $1 trillion to ease strained capital markets in the wake of the coronavirus sell-off.
By the close of business, the Dow was down nearly 10% for the day, the worst daily loss since 1987.
Our advice to investors is the same as our health advice: Distance yourself.
Dear Readers are probably already comfortably out of stocks. But now the crisis is entering a new phase… with a new danger.
The first stage of a major debt crisis is deflationary. Prices fall. Companies go broke. People get laid off. Investors typically rush to the safety of U.S. Treasury bonds. T-Bond prices go up, even as prices for corporate and “junk” bonds go down.
But then comes stage two: inflation. Now the feds are pumping in new money on a whole ‘nuther scale. And that’s when the T-bonds go down.
Why? Because the only way the feds can fight the downturn is by issuing more fake money. More bonds. More quantitative easing (QE). More dollars. More stimulus. More deficits. More Repo Madness.
Sooner or later, all this new, fake money drives down the value of money itself…
…and T-bonds, calibrated in dollars, go down too.
More on Monday…
• This article was originally published by Bonner & Partners. You can learn more about Bill and Bill Bonner’s Diary right here.