I discussed the problem of maintaining liquidity in the face of what has become a national financial meltdown on this blog about a week ago. (LINK)
Economics aren’t based on the casting of runes (usually). If people stop spending money, the economy will compress, causing a recession and that’s where this economy seems to be heading. 
The S&P 500 plunged 8.1 percent at the opening bell to 2,490.47, stopping trading for the third time since last week. The index triggered a so-called circuit breaker that halts trading for 15 minutes if it falls at least 7 percent.
The Dow Jones industrial average plummeted 2,250.46 points, or 9.7 percent, before trading stopped while the Nasdaq composite plunged 6.1 percent. 
The massive drops came after the Fed slashed its benchmark interest rate to near zero on Sunday — a move that suggests the central bank is bracing for a recession. And the recession will come even if Congress is able to pass a sort of Plague bail out. As people stop going out to eat, stop buying cars and durable goods, stop attending public entertainment events, etc. the economy will become worse.
It all revolves around the perception of consumer spending in the face of the Chinese Plague.
I realize that many people who read this blog are concerned, justifiably, by massive government debt, that’s about to become a lot more massive. As financial systems are stressed and the companies that employ people consider laying off, a recession is inevitable. The question is how long it will last and how deep it will go.
My consulting business has dropped to zero. The projects in Greece are delayed, but some of them are likely to be approved as they are part of national survival. But it will be much slower coming since that country is as shut down as Italy and Spain are. The national security related matters that we’re working on are paused because all activity has stopped as people try to assess what the new normal will be. My business in China stopped two months ago when that place went into free fall. The relationships between nations are being re-examined and while that would usually be great for me, and may end up working out, it’s all on hold. And that is emblematic of the world right now. We’ve never had to deal with the release of a “novel” or “weaponized” virus before.
A lot of people are waiting for the next shoe to drop.
I expect that Congress will come up with some sort of infrastructure bill even though the Democrats hate President Trump. It will mean a lot of porkbarrel spending, but if managed well, it might be able to turn the economy around more quickly than would happen if that didn’t happen.

11 COMMENTS

  1. Just how much do they hate Trump; and do they care what their constituents think?
    They won't be affected, since they are all rich on our tax dollars.

  2. At some point pent up demand will meet means assuming people are saving the money they normally would spend on amusement and dining out.

    A bigger question is what the financial folks do. I well remember the time around 2002-2005 when getting people financed in cars became a challenge. FICA score 700+. Decent down payment/carry back well under invoice. Sorry sir, maybe your credit union?

  3. The congressional caucuses have gorged themselves at the expense of the taxpayers for a long time. I don't think that they care much, so long as they are returned to office.

  4. We will know more in a month than we do today. All of the projections at the moment are being done with chicken bones and tea leaves.

    The credit market should be wide open. And I expect that it will remain so through the end of the year.

  5. IMHO They, meaning the Democrats and their adulators, hate President Trump with a vehemence beyond measure. I watched as people had psychotic episodes just after the election.

    Like all politicians, their first priority is being reelected. To that end, unjustifiable actions cease to exist. They would gladly ruin the lives of everyone rather than take the chance of losing the next election.

    And no, they couldn't possibly care less about their constituents opinions, suggestions, or well-being.

  6. We need to hang them and start over. The new legislature could look out at the light poles with the former legislators hanging, with ravens picking their eyes out – and maybe they'd decide to act in our best interests. The Romans used crucifixion, but that ship has sailed. Crucifixion would create martyrs.

  7. The supermarkets around the Chicago metro area are busy, but not depleted. Shelves are being re-stocked hourly, so the trucks are still running deliveries. The governor shut down the schools and restaurants/bars. God bless the retail grocers and their suppliers, they are keeping the system afloat for now.

  8. Well, the pop-psyche industry must be proud of themselves as we see Mob Psychology in action. 100 auto deaths everyday in the USA…there are 69 deaths from this "bad cold" virus, and most – if not all – of those were immunosuppressed elderly.

    Dropped off a vehicle at my local independent repair guy (who is NOT in town)…shook his hand…we laughed…COVID19 can't live in grease, let alone a few hours in any environment, and touch transfer rate is minuscule.

    Today we are witnessing the Left's nirvana of taking over small business and dictating to the masses "how it will go and how we are to live". Telling people to go broke is the effect. It's Marshall Law by the backdoor, a coup to destroy America at any cost. Guv. Como – an elite moron – said as much as he went on and on in his bumbling speech.

    This will get worse…the Dem's will gleefully burn the place down to "get Trump", and the complicit self-important hyperventilating media (who have no clue what they are talking about) have fomented fear and panic. And the weak-minded among the populace (who believe The Bachelor is real) follow along like the lemmings they are.

    We were breathlessly told a few weeks ago this is "10x more lethal than flu". This is/was flatly false. Influenza is a significantly worse affliction. COVID19 is nothing more than a bad cold for 95% of people, most not even know/knew they had it. And the actual numbers do not add up — 171K worldwide??? No offense to those who got sick or died, but that's NEXT TO NOTHING! A blip.

    Those who died from this already had weak systems (certainly those who are immunosuppressed should take precaution.)

    That said, COVID19 being 10x worse than flu is now correct BUT regarding the economy…and the immoral Left is happy to not work or interact with their neighbor and force you to do the same. But they'll still demand food delivery to their self-quarantine condo, then write a bad Yelp review if it's late.

    But hey, there is one bright spot — Georgia Pacific is ramping up terlit paper production to "help" the hoarding idiots…it's a win-win for their stockholders.

  9. I posted a long winded position on the Chinese Plague. That's now on the blog. If we're smart it will be viewed as a gross over reaction and the Democrats will try to impeach President Trump for taking any action at all. And of course, Georgia Pacific stockholders will buy executive jets, yachts and mansions in the South of France.

  10. Sorry for the extended rant…I'm pissed the losers get so much influence. But there I go stating the obvious with little to no ability to remove them from the gene pool (sounds unchristian but sorry, the gloves are off when the vast minority – the urban deranged – somehow manage to overshadow the majority of rational normal thinking folks who are trying to live life without their invasive interference.)

    Will read your post as I am sure it is prescient.

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