With over $20 trillion lost in the world economy, the White House scrambled to find economic relief for a country heading rapidly into recession. Treasury Secretary 57-year-old Treasury Secretary Steven Mnuchin proposed something akin to the $700 billion Oct. 3, 2008 Troubled Asset Relief Program [TARP] first proposed by former President George W. Bush to deal with the financial collapse leaving bank without cash and the automotive industry bankrupt. Mnuchin asked Congress to approve over $850 billion to help struggling businesses and individuals with coronavirus pandemic forcing the government to shut down major industries to stop the spread of the virus. Businesses large and small have been shuttered to prevent gathering of more than 10 people to stall the spread of the virus. “We want to make sure Americans get money in their pockets quickly,” Mnuchin said.
If you look at Wall Street bounce around, it’s obvious no one know what to do with the uncertainty of the SARS CoV-2 pandemic, closing down entire countries with no end in sight. Yet after yesterday’s 2,997 plunge in the Dow, the worst point drop in U.S. history, the “dead cat bounce” has happened today with markets trying to make a rebound. Bargain hunting day-traders find themselves swooping up depresses shares only to watch short sellers step in a begin selling again. One hour from today’s close the Dow bounced in a range of over 1,000 points to 500 points, not knowing whether traders will unload stocks by day’s end. No long-term investor should jump into a market driven by high frequency trading programs, trying to make a fast buck on the misery of long-term investors. Where the market winds up today is anyone’s guess. What’s known for sure is the economy’s in bad shape.
Sunday’s emergency meeting by the Federal Reserve Board slashing interest rates 100 basis points told Wall Street everything it needs to know about the economy. Whether the Fed’s stimulus programs, including a new round of $700 billion in Quantitative Easing [QE], have any immediate effect is questionable. Monday’s 2,997 loss tells the story of what happens when the Fed intervenes aggressively. It signals to traders that the economy is on life-support, needing emergency measures to keep the economy from crashing. Yet as 67-year-old Fed Chairman Jerome Powell said the Fed has never dealt with a killer virus pandemic, tossing all the ordinary rules up in the air. “I’m going to be very leery of doing something like 2008,” said Sen. Mike Braun (R-Ind.), referring to the old TARP bailouts. Braun’s not yet with reality that without major life-support, the economy’s going to crash.
Unlike the 2008 Financial Crisis, the Fed could point to failed mortgage-backed securities, causing certain banks and brokerage houses to go under. Today’s coronavirus presents far more uncertain circumstances than 2008, where economists could figure out a fix to the economic mess. But there’s no precedent in U.S. history for dealing with a rapidly escalating viral outbreak, threatening to sicken or kill large groups of U.S. citizens. What freaks out the World Health Organization [WHO] or Centers for Disease Control [CDC] are the high death rates to the Covid-19 outbreak. Slowing the viral spread requires shuttering large-and-small businesses, damaging local, state and federal economies. Senate Majority Leader Mitch McConnell (R-Ky.) said the Senate would stay in session until it has a economic relief bill. House Speaker Nancy Pelosi (D-Calif.) wants guarantees for workers’ paychecks.
President Donald Trump’s trying to reassure citizens but doesn’t have a clue how long the global pandemic will last. Speaking yesterday, 79-year-old National Institutes of Health Chief Infections Disease Specialist Anthony Fauci advised the nation to shut down any groups over 10 people, whatever the venue. Fauci advised social isolation, distancing, hand-washing, working from home, anything possible to slow the spread of the virus. He suggested the crisis could continue into July or August, though stopped short of any predictions. Sen. Mitt Romney (R-Ut.) urged Congress to give every American worker a check for $1,000, something avoided during the 2008 TARP bailout. “The Senate will not adjourn until we have passed significant and bold new steps above and beyond what the House has passed to help our strong nation and our strong underlying economy weather this storm,” said McConnell.
New York University Stern School economist Nouriel Roubini encouraged Congress to give every adult citizen an extra $1,000 to spend into a flagging consumer economy. “Everybody needs at $1,000 or otherwise we’ll end up in the Great Depression at this point,” Roubini said, urging Congress to bailout consumers directly, not just corporations. With the Fed doing everything possible to shore up financial resources, Powell urged the president and Congress to work on their own stimulus, needed to offset the effect of the coronavirus pandemic. “There’s a great spirit” with lawmakers, Trump said at the White House. “I can say that for Republicans and Democrats,” knowing that there’s little elected officials can do to stop the virus from spreading. Shutting down large and small businesses may be necessary to slow the virus but it’s catastrophic to ordinary people trying to pay their bills.
