The story of how the fed got to printing $1 million per second.
The fed has announced enormous amounts of economic stimulus, averaged out it equates to nearly $1 million per second or $60 million per minute. To put that in perspective it is said the average american makes $2 million in their lifetime. Every two seconds the government is helping itself to a lifetime of wealth.
Unlike other market collapses this one has a secondary economic event happening in tandem, creating an unforeseen global crisis. That secondary event is the Corona-virus pandemic. It has provoked worlds governments into implementing strict social measures, the likes of which have never been seen before. This is, they say, to quell the tide of new cases and protect healthcare systems and citizens across the globe. Over a quarter of the worlds population have ‘locked-down’ or isolated at the time of writing including yours truly. These measures have had secondary effects on the markets and acted as a catalyst for the economic collapse
The measures taken to stem the flow of new cases include a combination of travel bans, lock-downs and school closures. This has stopped most businesses from operating, strangling worldwide economic activity. As people become insecure in their jobs, non-essential businesses have to close their doors. The current social restrictions are hurting business bad. For a few examples look no further than Boeing, whose stocks are down over 70%, or retailer Guess whose stock tumbled 60%. Any business that was weak before this collapse has no chance of recovering, government aid, or not.
Another stark statistic is the US Initial jobless (unemployment) claims. They spiked to unprecedented levels. A total of 3.28 million people filed for unemployment insurance in the week ending March 21st. Dwarfing any previous highs. This data elucidates the speed and depths to which this crash can go. Leaving analysts in no doubt this is at the least a recession.
Both the markets and the governments were not positioned to manoeuvre out of either a pandemic or a financial collapse. Never-mind both of them at the same time. For example before the 2020 crisis began, fed rates had not been raised anywhere near their levels before the 08-GFC. As such leaving the fed just two rate cuts it could make before it had to think about going negative. It made those two cuts within two weeks of each other. Doubling down on its first cut faster than it had ever done in its history.
The fed have painted themselves into a corner, over the course of many years. Leaving it no other option but to print money. Lots of money. The fed president has said it has no limit to what it will print. It has so-far announced injections of $1 trillion a day and a $6 Trillion stimulus package. As well as dollar airdrops to citizens.
The leaders of business and the economy are panicking. The FDIC released a video asking US citizens not to withdraw their money from the banks as it ‘wasn’t safe to do so’.
A more sombre example happened on march 28th 2020. The German state finance minister Thomas Schäfer was found dead, he had committed suicide. The reasons for his taking of his own life were considerable worries about covid-19, the incipient depression and the countries ability to weather the storm.
German State Premier Volker Bouffier said about the mr Schäfers passing .
“His main concern was whether he could manage to fulfill the huge expectations of the population, especially in terms of financial aid. He clearly couldn’t see any way out. He was desperate, and so he left us. That has shocked us, has shocked me. Our sincere condolences go to his closest relatives.”https://www.dw.com/en/german-state-finance-minister-thomas-schäfer-found-dead/a-52948976
To conclude, it is likely that this is not going to get better soon and the economic fallout will be unlike anything we or previous generations have seen before.