Washington & the Fed are all out of ideas about how to stop Crash2. They will blame the Wuhan virus, but the facts show they’ll be lying
All the signs you need to see are there this afternoon and early evening in the markets. The dead-cat bounce I predicted Tuesday has ended, and more value has been sliced off the Dow: a fall of 1,600 pts (6.4%) has been the sentiment reaction to another Fed rate cut and a pathetic stimulus con-trick from the White House. (New UK Chancellor Rishi Sunak unveiled a $38 billion coronavirus action package in today’s budget…. nearly five times that floated by Trump for an economy only 14% of that in the US).
Stocks plunged around the world, oil tumbled and demand for safe havens spiked higher after the World Health Organisation officially declared the COVID19 virus a pandemic, and the Trump administration remained unable to detail any further stimulus measures.
Central Banks and their satellites have reverted to the familiar self-defence of selling gold to each other in phased waves – the better to mark the price down to $1635 today. But it’s all to no avail: the mood has changed out there, and the undercurrent is to sell stocks. At some point over the next ten days, that will turn into a stampede; and as I never tire of saying, there is no such thing as a gradual panic.
The situation will be exacerbated by the fact that algorithmic programs won’t know how to react. “Uncertainty is going to continue to create a lot of volatility,” said David Spika, the president of GuideStone Capital Management. “We have no idea how to model it, we have no idea what to expect from it.” None of this is rocket science: I fully expect that, by the third week in March, investors will be piling into every safe haven they can find.
There aren’t many on offer – if you cut rates, it only acts as a further stimulus to off-risk; European equities wiped out a 2.3% advance sparked by an emergency rate cut in the UK. If you can’t come up with a QE3 on steroids, the gloom gets exponentially darker. The symptoms of full-on crisis are now undeniable: Boeing shares fell 13% after revealing plans to draw down all of a $13.8 billion loan, Goldman Sachs slashed all its forecasts, and openly said the bull market is ending, Oil futures tumbled again today as the US Energy Information Administration said commercial crude oil inventories increased by 7.7 million barrels in the week ending March 6, and Brent crude fell 2.7% to $36.20 a barrel.
It is at this point that everyone needs to get real about COVID19 as a “cause” of the coming mayhem: as I posted earlier in the week both here and on Twitter, whoever you might believe responsible for the virus, it is being grasped by the 3% as a patsy. ‘Think of COVID19 as Lee Oswald’ I suggested on social media yesterday.
There is no getting away from it: the UK economy was flatlining long before anyone in the West had even heard of Wuhan. The British economy contracted in November and stagnated in January, which offset a small boost in activity in December, the Office for National Statistics said yesterday.
Equally, Italy was a basket case waiting to happen before the virus caused panic there; and the New York Repo market was a liquidity desert way back in last September before a single virus case had been reported. Six months before the Chinese Corona variant appeared, France had an officially declared 35% gap between central government spending and tax receipts.
Covid19 is not a cause, it is a catalyst.
The problem lies in lauding a globally connected financialised mercantile world dependent on a cock pit for the raising of capital….in a context where big, blind process works for the few, and gets bailed out by the many.
Left field always catches that system unawares. And the precepts of neoliberal monopolism – no debt owed to society, just to the shareholders – makes a dangerous situation potentially tragic….as we shall see bigtime in Italy, and to some extent in the US too.
Add to that sorry landscape the madness of mass migration (whose sole rationale is the reduction of labour costs) and you have low-grade 3rd world hygiene standards let loose in an already investment-starved infrastructure.
For some, that observation will brand me racist. Fair enough: but we have empirical reality staring us in the face…..and although the effects of COVID19 have been ridiculously exaggerated, those who cleave to unscientific wish-fulfilment are about to be found out.
Sooner or later – as with Islamic rape gangs – at least a degree of truth will emerge; namely, that economic ideology, greed and graft allowed COVID19 to kill a lot more people than it should have done.
Whether the populace will ever grasp that is another matter entirely.