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https://www.bloomberg.com/news/artic...s-markets-wrap
Well well well... it looks like the goose has been thoroughly cooked, seared and grilled. The past days have been a monster problem for the stock market as the global economy grinds to a halt.
Thoughts?
I'm waiting for it to reach a nadir in a few months then invest.
It could help remove some of the zombie companies.
~:smoking:
https://i.imgur.com/HOTpdaw.jpg
Today was the 2nd largest percentage decline of the Dow in history. The worst was in 1987. Today was the worst absolute drop in history. RIP pensions.
5 of 5 largest point drops ever have been in the past month. 2 of 5 of the largest drops percentage-wise. The worst being 1987, the other two being October 1929. Today it closed 12.94% down. The worst day in 1929 was a decline of 12.82%.
Global recession risk seems high.
Don't compare this to other Panics because this is a crisis in the real economy, not (primarily) in the banking/finance system. Remember, interest rates and Treasury yields keep going lower and lower. Credit is cheaper and more readily available than ever, even now. The problem isn't the money markets per se, it's the collapse of supply and demand in a vulnerable, overextended recovery, on a global scale. Wowee.
If this is a looming recession, after a 2019 of weak global growth, hopefully we get it right this time.
IMO its long term effects will be minimal. It's a recession originating from a special crisis, which, even if the most pessimistic scenarios are confirmed, will not last for ever. This means that the markets will receive some dramatic hits, but they will gradually recover, regaining their strength in probably less than a year. Not to mention the fact that once such sudden "disasters" are overcome, we usually experience an economic boom of however limited duration. On the contrary, systemic issues, like that of 2008, lie in the structure itself of the economy and are much more difficult to fix. Even impossible, sometimes, without breaking some eggs. I'd argue that Europe and the US even today have not completely recovered from 2008, but that won't be the case for the coronavirus collapse. Just my uneducated two cents.
Its the chinese that have most reason to be economically worried; now is not a good time for investors to be worried that thier slaves might end up dying before the end of a 14 hour shift. Lot of strings being pulled to keep people from wondering if the chinese are going to have yet another epidemic in the near future.
It's probably the reason they sat on it for a month and a half, the less charitable interpretation being a "if we're going down everyone else is going with me" move.
We were, according to many analysts, "due" for a bout of recession as part of the inevitable up and down cycling of the economy. Prior to any concerns with the virus economic impacts, a near-future recession was already presumed likely. With the economic curtailment resulting from Covid-19 as a trigger, tipping into recession from where we were was a virtual guarantee. How bad will it get and for how long are, of course, the unanswered salient questions. And, until a vaccine is developed or other significant mitigations in place it may be too early to really answer those questions anyway.
Or as someone who reads more about them and doesn't have a paranoid streak may think, there is a conflict between local government officials who want to keep a cushy job and a central government that expects local government to be more competent than they frequently turn out to be.Quote:
Originally Posted by Greyblades
A related question would be, do Brexiteers still think that democracy trumps reality? If experts tell them there will be a mess unless they do things a certain way, does democracy override expert opinion?
We should re-gear our economy and society to a greener model, with less waste and greater shaping to suit local conditions. We're looking to wartime conditions for an example of what to do. The most salient lesson should be how we reduced unnecessary resource usage, among them the fuel that drives a globalised economy. Back then it was to save everything for the troops at the front. We should do it again, for the sake of reducing waste and increasing sustainability.Quote:
Originally Posted by Seamus Fermanagh
That's kind of what I had in mind. Structural issues carried over, like (consumer) weak spending with high debt accumulation, may undermine the economic and political recovery without special correctives.Quote:
Originally Posted by Crandar
And let's keep in mind the kind of predictable consequences that are in store for us as we enter any coronavirus contraction. We're talking chronic broad mass unemployment, with service sectors hardest hit. Unknown duration (and some probability of aftershocks).
A lot really does depend on how serious governments get with social programs and direct stimulus during and after the emergency. If the marketists have their way here in the US we will dole out hundreds of billions in industrial subsidies while leaving the public with payroll tax cuts.
And the guardian award for awkwardest brexit shoehorn goes to...Quote:
Originally Posted by Pannonian
https://www.nytimes.com/interactive/...gtype=Homepage
3.3 million jobless claims in a week...
An inevitable component of the enforced shutdown. Our governments have been actively encouraging layoffs in order to make persons eligible for unemployment payments.Quote:
Originally Posted by edyzmedieval
This is the thing I worry the most about personally. I had two final interviews for new jobs indefinitely postponed and I am scheduled to leave my current job at the end of April (contracted position). So I really hope things calm down by then because while I have savings, I dont have much. Couple that with DC getting completely screwed when it comes to the Senate stimulus bill due to it being classified as a territory and not a state. The average amount that states are getting per resident is a bit over $2,000 while DC is getting about $700, despite paying more in federal taxes than many other states. Really shameful, and I hope that the House can fix this.
I'm worried about the personal effects of this crisis too. After years of working full time and taking night classes I'm finally going to graduate with my Associate's at the end of this semester and I was planning on moving to a new city at the end of this year so I could get my Bachelor's at a school that has an Anthropology major. I think my current job is secure as long as it doesn't completely go out of business, but I don't know how I will be able to make the move if the economy is in recession and I can't find a job in the new city.
https://www.yahoo.com/news/dumped-mi...160839647.html
https://www.youtube.com/watch?v=_J2NHjBkRmIQuote:
Dumped Milk, Smashed Eggs, Plowed Vegetables: Food Waste of the Pandemic
David Yaffe-Bellany and Michael Corkery
April 13, 2020, 1:08 AM GMT+9
In Wisconsin and Ohio, farmers are dumping thousands of gallons of fresh milk into lagoons and manure pits. An Idaho farmer has dug huge ditches to bury 1 million pounds of onions. And in South Florida, a region that supplies much of the Eastern half of the United States with produce, tractors are crisscrossing bean and cabbage fields, plowing perfectly ripe vegetables back into the soil.
After weeks of concern about shortages in grocery stores and mad scrambles to find the last box of pasta or toilet paper roll, many of the nation’s largest farms are struggling with another ghastly effect of the pandemic. They are being forced to destroy tens of millions of pounds of fresh food that they can no longer sell.
The closing of restaurants, hotels and schools has left some farmers with no buyers for more than half their crops. And even as retailers see spikes in food sales to Americans who are now eating nearly every meal at home, the increases are not enough to absorb all of the perishable food that was planted weeks ago and intended for schools and businesses.
The amount of waste is staggering. The nation’s largest dairy cooperative, Dairy Farmers of America, estimates that farmers are dumping as many as 3.7 million gallons of milk each day. A single chicken processor is smashing 750,000 unhatched eggs every week.
Many farmers say they have donated part of the surplus to food banks and Meals on Wheels programs, which have been overwhelmed with demand. But there is only so much perishable food that charities with limited numbers of refrigerators and volunteers can absorb.
And the costs of harvesting, processing and then transporting produce and milk to food banks or other areas of need would put further financial strain on farms that have seen half their paying customers disappear....
A significant economic rethink is required after this period because it's clearly a significant problem when we have a worldwide disruption leading to a complete economic crash.
Furthermore, the amount of money being printed right now is frightening. I really really hope this will not lead to significant inflation.
Don't both recessions and pandemics typically bring deflationary pressures? When has austerity not been an economically and socially-damaging mistake?Quote:
Originally Posted by edyzmedieval
Print away.
I think everyone can expect that the second this is over conservatives will be clamoring for austerity, having learned absolutely nothing from 2008.
When was the last time inflation was above 5%? How many times in the past 40 years was it above 5%?Quote:
Originally Posted by edyzmedieval
Purpose in pain. Pleasure in profit.Quote:
Originally Posted by Hooahguy
Quote:
Originally Posted by Shaka_Khan
The decay spreads over the State, and the sweet smell is a great sorrow on the land. Men who can graft the trees and make the seed fertile and big can find no way to let the hungry people eat their produce. Men who have created new fruits in the world cannot create a system whereby their fruits may be eaten. And the failure hangs over the State like a great sorrow.
The works of the roots of the vines, of the trees, must be destroyed to keep up the price, and this is the saddest, bitterest thing of all. Carloads of oranges dumped on the ground. The people came for miles to take the fruit, but this could not be. How would they buy oranges at twenty cents a dozen if they could drive out and pick them up? And men with hoses squirt kerosene on the oranges, and they are angry at the crime, angry at the people who have come to take the fruit. A million people hungry, needing the fruit—and kerosene sprayed over the golden mountains.
And the smell of rot fills the country.
- The Grapes of Wrath
To be scrupulous, in my post above I had big sovereign currencies especially in mind, polities the likes of the US, UK, Euro-zone, Japan, China... For all I know a country like Kazakhstan still has more practical constraints from conventional wisdom on its monetary policy.
All the more reason for the rich countries to prime the global economy by blowing some - digital - bills (including currency swaps).
Fun fact (though to be scrupulous again I'm not verifying it right now): US inflation during WW2, when the majority of GDP was government spending, was lower than in the years immediately after the war.Quote:
Originally Posted by a completely inoffensive name
You're going to like this article, ACIN, on the intersection of the coronavirus relief/stimulus and Modern Monetary Theory.
https://www.nytimes.com/2020/04/15/b...lus-money.html
Note re: the $2 trillion figure that the Federal Reserve is technically injecting trillions more than the $450 billion allocated to it in the latest relief bill last month, with a commitment to unlimited quantitative easing, so the numbers in the legislation were there for some obscure technical reasons that I don't understand. But the point is, we have like 20% unemployment and near-unlimited money.Quote:
The United States has responded to the economic havoc wrought by the coronavirus with the biggest relief package in its history: $2 trillion. It essentially replaces a few months of American economic activity with a flood of government money — every penny of it borrowed.
And where is all that cash coming from? Mostly out of thin air.
The traditional view of economic theory holds that governments and central banks have distinct responsibilities. A government sets fiscal policy — spending the money it raises through taxes and borrowing — to run a country. And a central bank uses various levers of monetary policy — like buying and selling government securities to change the amount of money in circulation — to ensure the smooth operation of the country’s economy.
But the relief package, called the CARES Act, will require the government to vastly expand its debt at the same time that the Federal Reserve has signaled its willingness to buy an essentially unlimited amount of government debt. With those twin moves, the United States has effectively undone decades of conventional wisdom, embedding into policy ideas that were once relegated to the fringes of economics.
For the Brits: Bank of England to directly finance UK government’s extra spending
Problem with MMT is economists don't have a good framework on why we did not see inflation from the 2008 stimulus and QE. There is no guarantee the conditions today are the same and we could be walking into massive inflation in the near future.Quote:
Originally Posted by Montmorency
MMT says, "it's no problem, keep printing money" but this key premise is neither agreed upon nor does it have a wealth of evidence to back it up.
As a discipline, MMT is still viewed skeptically. Current practices are based on fear and image, not any belief in MMT principles.
It was 3% in the Eurozone in 2011, immediately after they started printing with Quantitative Easing. But because of demand issues, it fell down so now we have it at 1.2%Quote:
Originally Posted by a completely inoffensive name
This is uncharted territory - we don't know. Looking at past tables was a good idea, now nobody knows.
That's not accurate. It's a shallow simplification of the concepts that you'll always hear advocates reject. One of the foundational principles of MMT is that the primary constraint on government spending is inflation, the corollary of which is that inflation matters and requires offsets. There is an assumption of an upper bound of money supply or resource utilization at which inflationary pressures become undesirable, and policymakers should account for this in constructing policy. In practical terms this is coupled with the observation that we are far beneath any ceiling and have fiscal slack. Worrying about inflation in the OECD in the middle of a pandemic and widespread negative real borrowing costs is analogous to the man dying of COVID in the other thread whose last words as he was intubated were "Who's going to pay for it?"Quote:
Originally Posted by a completely inoffensive name
https://nymag.com/intelligencer/2020...ities-now.html
I mean, there isn't a great deal of substantive difference between mainstream Keynesianism and MMT to my understanding, other than that many proponents have independently-controversial policy prescriptions such as permanent zero interest rates and a job guarantee as fiscal stabilizer.
Central banks are just following their missions to stabilize prices and employment and financial liquidity. Reality tends to show through action, which is not to say that reality compels action - as we know.Quote:
Current practices are based on fear and image, not any belief in MMT principles.
The point of fiat currency is to allow economic exchange to take place regardless of the physical supply of an accepted currency resource, to reflect the ability of an economic area to produce goods and services. Otherwise you have things like England being unable to facilitate an internal economy because its accepted economic resource, silver, had all been paid to China for tea. When the population is willing and able to produce, but there is insufficient confidence to allow the exchanges to take place, then you turn to economic stimulus, to allow at least a baseline economy to function.Quote:
Originally Posted by a completely inoffensive name
Simmering away under all of this is, I believe, the biggest single attitude shift in the USA in favor of European-style Democratic Socialism in our history.
You're not wrong about this. With this crisis all of a sudden people realised how important it is to have safety nets to protect those vulnerable.Quote:
Originally Posted by Seamus Fermanagh
https://www.bloomberg.com/news/artic...s-lockdown-hit
Quote:
The U.K. economy shrank almost 6% in March as the nation went into lockdown, plunging into what may be its deepest recession in more than three centuries.
The sharp decline is only a small part of the damage of the restrictions to control the coronavirus, which were in place for all of April and look set to endure in some form for months to come. The measures heaped misery on an already tepid economy, with the Bank of England forecasting a staggering 25% contraction this quarter.
That highlights the monumental task the government faces in restarting the economy as it begins to take small steps toward easing the lockdown. It’s extended an aid program for workers, while the central bank will probably pump even more stimulus into the economy to keep the motor running.
Printing more money in the 2008 crisis worked for just over a decade, but resulted in more countries carrying more and more debt as compared to their GDP. Printing absurd amounts of money now will only result in a worse crash the next time there's a financial crisis. It's also interesting to see which jobs have been considered "essential" throughout all of this. Anyone read any stories of how "essential" a bankers job is? I haven't (although they are essential, albeit of the work-from-home kind). There's going to be fallout over how "essential" workers have been forced to go back to work despite the risk involved, and with many of these "essential" businesses not bothering with even minimal measures to protect said workers, many of whom are migrants/immigrants.Quote:
It’s extended an aid program for workers, while the central bank will probably pump even more stimulus into the economy to keep the motor running.
The people bailed out the banks so perhaps it is time for them to bail out the people.