IsThis What it Takes?

This morning from the White House at the break of dawn,
our dear leader sent a tweet, as usual, but this one was frightening.
He said that the cure for this situation is worse that disease.  By the
disease he means the financial collapse.  He is flummoxed by the
fact that no matter what he proposes, the economy is still in a
free fall.  The numbers have far surpassed the Great Recession.
This morning the President has said that the 'shelter in place' orders
are too draconian and we need to resume our lives.

To our north, the Toronto Globe and Mail Newspaper reports that
PM Justin Trudeau has told the Canadian people to 'go home and 
stay home'  and if they don't they will be subjected to fines and/or
arrest.  Gee, what does he know that Trump doesn't?  In addition,
Canada has said they will not send their athletes to the summer
Olympics.  Both the Globe and Mail and The London Times, are
reporting that this is the new normal until August at the earliest.

During the Great Depression the Federal Reserve was accused of
not acting fast enough, or doing enough to stem the economic down
turn.  During the Great Recession the Fed did act, it began a QE
program that saw it's holdings rise from $1 trillion to $4 trillion,
and it has remained there though the economy was going thru one
of the greatest booms in history.

Once again, the Federal Reserve is stepping up to try and stem the
economic collapse.  Last week it announced an influx of $700billion
to buy safe securities and bonds.  That temporarily gave the market
a boost.  It didn't last.  This week, the Fed has said it will buy
$375 billion in Treasury securities and $250 billion of mortgage
based securities.  And in the future they intend to also buy corporate
mortgage based securities.  To free up liquid assets, they have been
buying money market accounts from the banks to allow banks to be
able to make personal and small business loans.

This is a great stopgap measure.  But what will happen when this
pandemic begins to wind down?  When will the Fed stop QE?  And
if they don't, what tools would they have left if the virus comes back?
The Congress is working on a financial bailout also, to the tune of
$2 trillion.  Right now the government is running almost a $1 trillion
deficit yearly.  Let's add another $2 trillion to that.

Now let us consider the damage to the economy due to Covid-19.  The
GDP is expected to drop to -24% in the second quarter. That is three
times worse than the 2008 recession.  Unemployment claims reached
2,250,000 and the unemployment rate is estimated to reach 30%.
The earn-spend-earn cycle is unraveling.  Consumer spending accounts
for two thirds of the U. S. economic output, and people who shelter in
place don't spend money.  Like ripples in a pond, the problem grows.

Someday the pandemic will end.  What will be the new normal?  The
Covid-19 is a RNA virus and as such it is significantly more prone to
mutation.  If so, it will return again, most probably in the fall, as a
different strain for which our vaccines will have no effect.  Will we
be ready?

Our government has put into place, a plan for Martial Law should the
pandemic get any worse, or if there is wide-spread disruption, or
disorder.  Think about a scenario where Joe Biden is elected in a close
contest, marred by people staying home in fear of a virus.  Could that
or would that cause wide-spread disorder?  Could the present administration
invoke Martial Law and throw out the election?  Something out of a
Sci-fi movie?  Don't bet on it....

                                                            I'm just sayin'.