‘As cancellations, emergency restrictions, and panic selling of assets spreads, the global economy is at risk of grinding to a halt. We are already in the throes of the worst market mayhem since 2008.
If the news on the coronavirus front gets any worse from here, we will be facing a once in a century financial crisis – and a possible Great Depression ahead.
That said, there are at least some reasons to be hopeful. The number of coronavirus cases in China and Korea appears to have plateaued. Warmer weather in the weeks ahead and more aggressive containment strategies may begin to inhibit the spread of the deadly infection in the U.S. and Europe.
But public officials so far are failing to inspire confidence. German Chancellor Angela Merkel shocked the markets when she said up to 70% of the German population could contract coronavirus if more isn’t done to stop its spread.
And the stock market tanked immediately after President Donald Trump spoke to the nation Wednesday evening.
Meanwhile, the response from central bankers and the Plunge Protection Team has so far been woefully ineffective. The Fed’s emergency rate cut last week, and its $500 billion expansion of bond purchases announced Thursday have done little to stem trillions of dollars in market liquidations as circuit breakers on stock exchanges get blown out.
The tools central bankers have at their disposal aren’t suited to the problem at hand.
The Fed can address liquidity and solvency problems in the bond market and banking system. But it can’t get consumers, workers, and businesses in the real economy to return to their normal activities. Government officials wouldn’t allow a return to normalcy at this time, anyway.
President Trump is contemplating invoking temporary new emergency powers. And globalists are eyeing permanent new power grabs to restrict our personal travel and financial freedoms.’