Corruption in the Time of Coronavirus

Now even the fig leaf is gone. 

By Karen Parker Feld, The Irreverent Economist at Paladin Advisors:

On March 23, the Fed announced its largest-ever intervention in the financial markets. Bazooka is too timid a word to describe it. More like a neutron bomb. Our central bank, supposed defender of the currency and the stability of markets, can now purchase an unlimited amount of US Treasury and agency mortgage-backed securities (now running at the unheard-of rate of $625 billion per week). That’s on top of $1 trillion per week in repurchase operations. As amazing as it sounds, that’s not where the real action lies.

As part of Congress’s CARES act (ha, nice try!), the Treasury will create (or resuscitate) a series of special-purpose vehicles (SPVs) to buy all manner of financial assets, backed by $425 billion in collateral conveniently supplied by the US taxpayer via the Exchange Stabilization Fund. The Fed will lend to SPVs against this collateral which, when leveraged, could fund $4-5 trillion in asset purchases.

That includes municipal bonds, non-agency mortgages, corporate bonds, commercial paper, and every variety of asset-backed security. The only things the government can’t (transparently, yet) buy are publicly-traded stocks and high-yield bonds.

You may ask, is this legal? Not exactly.

The Fed’s charter prohibits it from buying securities that lack an explicit government guarantee. Hence the convenience of murky SPVs, to which the Fed is printing lending the majority of the funds. Jim Bianco spells out a slew of new acronyms: CPFF (Commercial Paper Funding Facility); PMCCF (Primary Market Corporate Credit Facility); TALF (Term Asset-Backed Securities Loan Facility); SMCCF (Secondary Market Corporate Credit Facility) and a bone to small business in the form of the MSBLP (Main Street Business Lending Program).

These SPVs involve the Fed in nearly every major US financial market. That’s not all: by providing low/no cost financing to large corporations, asset managers, distressed debt vultures ventures, and private equiteers, our Federal Reserve has fast-tracked the hoovering up consolidation of American business into the hands of the few, the wealthy and the powerful.

In case you were wondering who gets to make these all-important “investment” decisions: it’s Treasury Secretary Mnuchin, the one who bought troubled mortgage originator IndyMac in a 2008 fire sale, then supervised the illegitimate foreclosure of thousands of California homeowners.

Mnuchin won’t have to do all the heavy lifting however, his old friends at Goldman Sachs are happy to help out, just as they did in 2008. And the Fed tapped asset-management giant BlackRock to direct three of its bond-buying programs, which can purchase some of its own funds on behalf of the central bank. No conflict of interest there!

Democrats in Congress made a big show of their supposed oversight of these programs; in reality, there is none. The final draft removed most of the SPV reporting requirements. Even the Sunshine Law that governs the release of Fed minutes has been waived for the duration of these programs.

Secretary Mnuchin is permitted to dispense with the already-feeble limits on CEO compensation (they can get only two times what they earned in 2019!) as well as the suggested restrictions on stock buybacks and dividend payouts by bailed-out companies. Last but not least: these firms are not required to share any upside from the rescue (in the form of an equity stake) with the US government. Heads: company CEOs and investment banks win. Tails: the taxpayer loses.

These bailouts are not (or should not be) necessary.

Chapter 11 of the bankruptcy code was designed as a mechanism to keep companies operating while they restructure their debts. However, as Wolf Richter points out, that would mean wiping out the shareholders and replacing the company managers.

To me, that sounds like a very good outcome for CEOs who set their companies up for failure by leveraging their balance sheets in order to buy back stock (and juice their own compensation) rather than saving some cash for a rainy day. The airlines are merely the most egregious example, as Ben Hunt explains. Talk about unlocking shareholder value via the US taxpayer! Nice work if you can get it.

Some are wondering whether the market can absorb so much liquidity from a firehose. The more pertinent question is whether, having been such poor stewards of capital over the past decade, the companies who will benefit from this largesse are its proper recipients. The sums allocated to state and local government, small businesses and households pale in comparison to what large corporations and their investors will get, and are inadequate to support the collapsing US economy.

Additionally, there is little incentive for bailed-out firms to protect their employees. They are greenlighted to fire 10% of their staffs over next six months (and will undoubtedly be hurrying to get more of that out of the way before the loan documents are signed). There are no employment requirements thereafter. United—the airline that dragged Dr. Dao off the plane—has already announced that it will begin layoffs as soon as the 6-month hiatus is over. GM has made a similar announcement.

You cannot revive a consumer-led economy by depriving people who need money to survive while rewarding those who don’t need it at all. Even a cynic knows the math doesn’t work.

What are the consequences?

THIS cure definitely is worse than the disease. It is a giant step towards the nationalization of US financial markets. Our policymakers have been moving in this direction for decades, as their interventions have grown in size and frequency. What are the consequences?

There is effectively no obstacle to monetization of US government debt — meaning large increases in government spending financed directly by the Federal Reserve. Modern Monetary Theorists might be happy about this, if the funds were put to good use. They won’t be.

Treasury oversight of these programs opens the door for the executive branch to direct lending to favored parties, and to manipulate financial markets to achieve political objectives. As Jim Bianco observes, “we have a president who has made it very clear how displeased he is that central bankers haven’t used their considerable power to force the Dow Jones Industrial Average at least 10,000 points higher, something he has complained about long before the pandemic hit.”

Capitalism (other than the crony variety) depends upon competitive markets to correctly price and distribute resources and risk. In theory, financially-sound businesses get loans and capital, whereas profligate or obsolete companies do not. Those days are officially over, as price discovery is dead. Slower growth and higher inflation will almost inevitably result.

In the short run, an unprecedented government backstop of financial markets is a salve for anxious investors. But we think it’s a poisoned chalice. America has never run deficits of this magnitude (on the order of 30% of GDP) in the context of globalized capital markets and significant foreign ownership of US debt. Investors will re-evaluate their US holdings in the context of this new paradigm, once they are able to wrap their minds around it. And when they do, we expect to see a significantly weaker US dollar in our future. By Karen Parker Feld, Paladin Advisors

Fed’s assets spike to high heaven to bail out the imploded Everything Bubble it had worked so hard to inflate over the past decade. Read… Helicopter Money for Wall Street

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  279 comments for “Corruption in the Time of Coronavirus

  1. AlbieOK
    Mar 29, 2020 at 8:01 pm

    Tails we lose indeed. Kiss your kids’ future goodbye.

    • KingdomMe
      Mar 29, 2020 at 8:33 pm

      That’s if you rely on the government for your kids future.

      • Unamused
        Mar 29, 2020 at 9:48 pm

        Your progeny are subjects regardless of how or whether their ruler allows their provision.

        • Joe Saba
          Mar 29, 2020 at 10:26 pm

          what would happen if voters refused to vote?
          is there minimum show out to reflect total corrupt elections
          corrupt congress is for 1% (donors) only
          time to remove 100% congress, fed reserve, potus and SPOTUS

          pitch forks for everyone

        • Arctic Chickens
          Mar 30, 2020 at 7:19 pm

          Joe Saba, your solution is akin to not showing up to school so the bully can’t steal your lunch money. Except in this case the bully is stealing the future of everybody who doesn’t sell their souls to them and is going to use people’s fear to enact draconian control measures to ensure nobody can ever stand up to them.

          The only way the pitchforks work is if they are firmly embedded into every person that allowed this to happen, that benefits from it, and their families. Not this limpwristed whiny “I won’t participate” BS.

      • AlbieOK
        Mar 30, 2020 at 4:15 am

        What utter bunk

      • Blockhead
        Mar 30, 2020 at 5:35 am

        The so called government is destroying the economy. Unless your kids do not depend on the economy for work and play because they have inherited a fortune from you, you better believe their future is at stake.

    • Keith
      Mar 29, 2020 at 10:34 pm

      Socialism “CARES”

      • polecat
        Mar 30, 2020 at 12:06 pm

        Sure, Socialism for CONgrease .. and their donors. It’s Capitalism for all the plebian peons !

      • MaggieD
        Mar 30, 2020 at 9:33 pm

        Indeed… for the 10% kleptocracy demographic who has *already* had the U.S. Treasury bent over and raped for them by GOPer capos. The tax scam cuts (esp. the corporate cut rank welfare tit put in their mouths) and NY Fed debt fraud-monetization Ponzi since 2018 has utterly pillaged and plundered every last vestige of 90% of The American People to pursue the middle class dream.

        Unmitigated, indisputable socialism for the lawless richest of the rich who perpetrate with immunity buyback embezzlement, accounting perfidy, dark pool/insider sewers, PAC-funded GOPer fealty to economic rape, and of course TARGETED recondite Fed slush shenanigans of which only those behemoth miscreant Wall St. criminals can actually get ahold of, etc., etc., etc.

        America is NOT a “free market capitalist” enterprise – or else there would be accountability for the Boeings who use arcane creativity to burn $43 billion and then – instead of being kicked the fuck out of their offices and having to organize under Chapter 11 (aka suffer the consequences of the graft, mismanagement, and tacit SEC–sanctioned outright embezzlement by the shareholders).

        And now the fucking GOVERNMENT is putting on camoflauging face paint and easy-opening kimonos in this “emergency” kabuki – to provide the means for rich people/hedge funds/kleptocracy class to outright make a snuff film in plundering the incomprehensible preponderance of the “free” markets.

        Fuckers. I hope I’m alive for the day they drag these assholes out of their gilded bunkers and remand them to the ghettos and apocalyptic neighborhood wastelands for which they are indeed responsible – a la Escape From New York style. Masters of the Universe? These effete arrogant fuckers couldn’t even master their sphincters if they had to spend an hour in the devastation they’ve wrought upon hundreds of millions of Americans.

    • Shiloh1
      Mar 29, 2020 at 11:06 pm

      We’re at the point in the 1985 movie Re-Animator when Dr. Hill’s re-animated body is walking around the lab with his re-animated head in its hands after it was severed by medical student Herbert West. It gets interesting after that…stay tuned!

      • Mar 30, 2020 at 12:44 am

        Excellent reference! I KNEW this felt familiar!

    • mike
      Mar 30, 2020 at 4:27 am

      I forgot to say: excellent article.

    • mike
      Mar 30, 2020 at 4:37 am

      One more thing, our efforts in fifty states are uncertain, because there is no adequate tests or testing. Statistical methods could have been used to ascertain the rate of infection in each state, if sufficient tests had been available — if the government had ordered production of proper test kits by the private sector in January.

      Statistics are well recognized methods and are how businesses do quality control. Statistics are regularly used in all sciences and sampling by using random tests would have un-blinded policy makers and scientists, so that they could engage in more planning.

      Right now, the testing is primarily done for people that already have severe symptoms and thus is not random for the population. It is intermittently available per state, so the figures are not clear. Thus, we are flying blind also thanks to this administration.

    • HowNow
      Mar 30, 2020 at 5:39 am

      Here are two suggestions to remedy this pitiful state of affairs:

      1) Incentivize vasectomies. Offer free surgery with a $2500 bonus (with a few conditions: diminishing payout depending on age, income level, etc). Perfect for those who can’t plan more than one week into the future. Why push birth-control onto women?? Of course you’d have to give up some religious dogma to support this.

      2) Write in a solid candidate for President. Both parties and the WH are corrupt. Time to just write-in someone decent. That won’t come from either party; both are controlled by special interests. I’d suggest Lawrence Lessig. He would probably refuse the job, though. Check out one of his TED Talks on how the 2-party system really works.

      • Mar 30, 2020 at 7:16 am

        Mr. Lessig did not adequately identify who are the “Tweeds” today. He also proposed a poor solution to the problem of corrupt government. He merely proposed transferring the same power exercised today to a different group. This is just as corrupt as what we have now. True rule of law is needed and then elections will be of little consequence. They will be boring. See Bastiat’s The Law: http://bastiat.org/en/the_law.html

      • Deanna Johnston Clark
        Mar 30, 2020 at 10:29 am

        Why do some always say there’s too many babies and nobody says there’s too many middle aged f*rts?

        • HowNow
          Mar 30, 2020 at 10:55 am

          You don’t see increasing or even break-even population numbers a problem?????

          Growth, FOREVER!!!!!!!!!!!!!!

        • Javert Chip
          Mar 30, 2020 at 11:33 am

          Deanna Johnston Clark

          Wild-ass guess: because more dystopian,virtue-signaling posts are written by middle-aged farts than babies?

        • Escher
          Mar 30, 2020 at 9:08 pm

          What’s your solution: euthanize these middle aged (mostly white) “farts”?

  2. roddy6667
    Mar 29, 2020 at 8:06 pm

    Gee, all this government involvement in banking and the means of production sure sounds like socialism. A couple of weeks ago all the (alleged) capitalists were ranting about the evils of socialism. I stopped trying to understand American politics and economics in 1988.

    • historicus
      Mar 29, 2020 at 9:33 pm

      Larry Kudlow and his ilk….
      “free marketers” they claim, then in the next sentence promote the Fed to create fake demand for Treasuries to hide the federal deficit borrowing, protect rates from free market forces, and bump the stock market.

      • sierra7
        Mar 30, 2020 at 11:42 am

        Historicus:
        Kudlow is “over-fertilizing” his “green shoots” and will burn them to the ground! He doesn’t understand (financial agriculture) at all……..

    • IdahoPotato
      Mar 29, 2020 at 10:47 pm

      This is what passes for “capitalism” in America, land of the frantic, home of the brazen.

      A privately-held company in Oklahoma City (with branches in other venues like Austin, TX) called Imagenet Consulting laid off a swathe of its staff in the past two weeks. The privately-held company has a profit margin over 40% and revenues exceeding 100 million. was in the news today for interesting reasons.

      The Austin office circulated an agreement to its remaining employees that would dock their paychecks by 100% of any money received under the recently passed stimulus bill.

      The company would also take half of the $500 stipend allotted for dependents under the bill.

      https://www.kxan.com/news/austin-company-looking-to-dock-paychecks-for-those-receiving-stimulus-checks/?utm_medium=social&utm_source=twitter_KXAN_News

      • Canadian
        Mar 30, 2020 at 3:39 am

        That ImageNet story is mind-blowing. Epic amounts of sociopathy in business and government are being uncovered by this crisis.

        • csmith
          Mar 30, 2020 at 4:22 am

          Given how progressive the city of Austin has become, you would think there would be massive waves of shame coming down on this company. How could then continue to do business in that city?

        • Deanna Johnston Clark
          Mar 30, 2020 at 10:31 am

          Yes…kind of a Last Judgement exposure of all hearts.

        • sierra7
          Mar 30, 2020 at 11:45 am

          Canadian (and others):
          You see, that’s why there is always a role for a “Stalin” or “Mao”……in the (dis)order of world events. (Or course, a “Putin” to a much, much lesser degree)
          They would make quick conclusion of this kind of nonsense!

        • Canadian
          Apr 1, 2020 at 9:41 am

          The Stalins and Maos just make the sociopathy omnipresent in ever aspect of society.

    • max
      Mar 29, 2020 at 11:34 pm

      Corporate Socialism: The Government is Bailing Out Investors & Managers Not You
      By Nassim Nicholas Taleb

      https://nassimtaleb.org/2020/03/corporate-socialism/

    • mike
      Mar 30, 2020 at 2:03 am

      You are so right.

    • VintageVNvet
      Mar 30, 2020 at 8:32 am

      R stands for Socialism for the Rich, hence the R; D stands for Socialism for the Down in the Depths of Dumb and Dumber, hence the D.
      There are good people in both parties, but they are usually just ”howling” in the wilderness of corruption of both parties.
      We need a ”Constitutional Convention” to put control of our guv mint back in the hands of the working folks who have made and continue to make this country the place on earth ALL other workers want to come to, including especially get the crony and corruption out of capitalism.
      In spite of the apparently very good deals various ”robber barons” got in the mid to late 19th century, personal capitalism is what worked then, and will work again, with personal responsibility first and foremost for all participants.

      • c1ue
        Mar 30, 2020 at 10:21 am

        Far too simplistic. For one thing, the D’s are squarely behind the medical industrial complex…
        Secondly, you’ve perhaps not heard of the term “limousine liberal”?

      • Deanna Johnston Clark
        Mar 30, 2020 at 10:35 am

        Capitalism, like love, is always personal. What we have been calling both for decades is discrediting to all of us.

        People are more and more tired of their own BS and being ordered to worship the Golden Calf.

  3. Duane
    Mar 29, 2020 at 8:17 pm

    Corporate capture of the US financial system isn’t “nationalization”.

    • historicus
      Mar 29, 2020 at 9:37 pm

      Government officials accruing power to protect their cronies. They use the powers of the nation invested in the Treasury and Fed for this purpose.
      So the government doesnt “nationalize” in the sense of achieving ownership, but they do “nationalize” in the sense they CONTROL so much of what was once a free market.
      Now decisions, more than ever, made by the few unelected and behind closed doors, move the markets. It is a cabal.

      • Joe Saba
        Mar 29, 2020 at 10:28 pm

        but peasants got $1200

        • Mar 30, 2020 at 12:56 am

          …of their own debt.

        • Deanna Johnston Clark
          Mar 30, 2020 at 10:41 am

          I have good friends who live with their Dad and 2 brothers in a motel room because they were evicted. Their Dad has multiple sclerosis and gets disability. Mom…who knows…is long gone.

          Those checks will help them get another apt. and survive another day. These are not druggies or drunks…they are struggling citizens. The boys do odd jobs for me, because they don’t want “charity” and I want them to have their dignity.

          If anyone thinks $1200 is peanuts, they haven’t eaten enough peanuts!!!

        • eg
          Apr 1, 2020 at 3:39 am

          @Changemachine

          Well, yeah — that’s what cash is: US Federal debt (a zero coupon bond without a maturity date)

      • lenert
        Mar 30, 2020 at 12:05 am

        Fascism.

      • Steven F Hotho
        Mar 30, 2020 at 7:54 pm

        Mussolini called it corporatism and Hitler closely implemented it. The people were enslaved by it, but the trains did run on time.

    • Nate
      Mar 30, 2020 at 5:04 am

      Yep it’s Corporate Fascism

      • normansdog
        Mar 30, 2020 at 7:35 am

        Tautology.

        • Sydney Collin
          Mar 30, 2020 at 4:53 pm

          Sometimes, you gotta double down.

  4. Linda
    Mar 29, 2020 at 8:20 pm

    So what happens now, to fold as working people or really fight back.

    • DawnsEarlyLight
      Mar 29, 2020 at 8:24 pm

      Only difference is the gangs came out of the alleys, and on to the streets.

      • historicus
        Mar 29, 2020 at 9:38 pm

        What’s the legal definition of “racketeering” again?

        • IdahoPotato
          Mar 29, 2020 at 10:55 pm

          The President has made his intentions clear. He does not want any oversight. He believes these funds belong to him to dispense as he pleases, not to the taxpayers.

          https://www.nytimes.com/2020/03/27/us/trump-signing-statement-coronavirus.html

          When President Trump signed the $2 trillion economic stabilization package on Friday to respond to the coronavirus pandemic, he undercut a crucial safeguard that Democrats insisted upon as a condition of agreeing to include a $500 billion corporate bailout fund.

          In a signing statement released hours after Mr. Trump signed the bill in a televised ceremony in the Oval Office, the president suggested he had the power to decide what information a newly created inspector general intended to monitor the fund could share with Congress.

          Under the law, the inspector general, when auditing loans and investments made through the fund, has the power to demand information from the Treasury Department and other executive branch agencies. The law requires reporting to Congress “without delay” if any agency balks and its refusal is unreasonable “in the judgment of the special inspector general.”

        • A Citizen
          Mar 30, 2020 at 1:21 pm

          Potato did you read the Democrat insertions to the bill?

    • raxadian
      Mar 29, 2020 at 8:25 pm

      How can people fight back if they are stuck at home due to the coronavirus?

      • cas127
        Mar 29, 2020 at 11:07 pm

        There is a reason why various contingency plans for coups almost always involve quick capture of media stations, and more than occasionally include plans for creating rumors of disease outbreaks – it is intended to immobilize large numbers of possible opponents to the coup regime, which is most vulnerable in its first days.

      • Bernadette
        Mar 30, 2020 at 1:45 am

        raxadian — answer: This has been a ‘Set Up’ all along. Weaken the people to voice and stand their sense of fairness. (No bullets, no physical confrontations, no street blood shed)

      • robt
        Mar 30, 2020 at 9:56 am

        After a discreet period of time, say a week or two, they riot.
        Read history. Review even fairly recent history of the US when cities burned for no particular reason.

        • Mar 30, 2020 at 10:05 am

          robt,

          It’s already been two weeks.

        • Deanna Johnston Clark
          Mar 30, 2020 at 10:45 am

          The riots of the 60s and 92 were not over jobs and food…they were sparked by the murders of MLK and a police beating.

          The poor communities of the US have many, many good people and churches that help each other. Over jobs and food, it would take many months and the stealing would begin in the suburbs.

    • andy
      Mar 29, 2020 at 8:39 pm

      Many here say buying gold helps. Or timber or something..

    • Karen
      Mar 29, 2020 at 10:09 pm

      Financialization has sown the seeds of its own demise. The tide will eventually turn in favor of labor as debts are written off, supply chains are de-globalized, and demographics shrink the labor force. It will be a long road though…

      • CZ
        Mar 29, 2020 at 10:47 pm

        The shutdown has shown the absolute power the workers have over the economy, IF they were organized.

        Instead the idiots voted for anti-union GOP predators. Smooth move, working class.

        • JoAnn Leichliter
          Mar 30, 2020 at 3:58 am

          Or they just shifted from one predator to another.

        • Lisa_Hooker
          Mar 30, 2020 at 10:28 am

          No, the shutdown has shown the amount of labor expended on totally unnecessary services that people can do without. This is going to be painful.

        • Canadian
          Mar 30, 2020 at 11:07 am

          Lots of people keep making the “point” that Lisa makes, and it is annoying.

          *Most* of the economy, as it exists, could be “done without.” *Most* innovation in technology, health care, communications, computing, transportation, financial services, agriculture, retail and more are completely optional.

          Heck, humankind could technically survive without electricity, plumbing and medical care if it wanted to.

          The entire point of economic growth and the services that people keep saying “aren’t necessary” is improving quality of life.

          Do I “need” a 5G smartphone, or a wide assortment of quality organic food on demand, or the ability to travel in a personal car to a nice sunny spot for a picnic?

          No.

          But they make life worth living. And that has value, despite what all the negative nabobs ripping on barbers, personal trainers, software developers, etc. like to argue.

          This shelter-in-place situation is a MASSIVE collapse in the quality of life in the west; let’s not pretend otherwise simply because we can get by eating Ramen and Campbell’s soup.

        • Petunia
          Mar 30, 2020 at 11:41 am

          Unions protect union leaders and their relationship with management more than workers. Unions mean the end of innovation to me.

        • Canadian
          Mar 30, 2020 at 12:18 pm

          Unions tend to pop up when sociopaths are running major businesses.

          If you want innovation, fight against elevating sociopaths.

          Or enjoy your union.

      • c smith
        Mar 30, 2020 at 4:25 am

        Are you the author of this piece? If so, well done!

        • Karen
          Mar 30, 2020 at 7:50 am

          That’s me, thanks!

      • Icanwalk
        Mar 30, 2020 at 8:56 am

        Would all (most?) of public and private pensions be adversely affected if the market were to collapse? The halving of retirement funds would impact retirees and perhaps have current employees rethink their careers in public safety? And other fields as well?

        • Deanna Johnston Clark
          Mar 30, 2020 at 10:47 am

          Another great expose! It would separate those with a true calling for service from the goldbricks!!

        • cb
          Mar 30, 2020 at 11:06 am

          If the country chose to save pensioners, it could do so with direct payments to them. Why go through the trouble and expense of running bailouts through the Corporatists and Banksters.

        • JBird4049
          Mar 30, 2020 at 6:14 pm

          To Deanna Johnston Clark,

          Yeah, I get that. It is just that in the Greater San Francisco Bay Area 1,200 will pay for a single room for a month and is at most 2/3 of the cost for a small one bedroom apartment. This is where roughly nine million people live and for them it really is not much at all especially as most of them are now unemployed.

      • cb
        Mar 30, 2020 at 11:02 am

        Excellent article Karen.

        From my vantage, Financialization is just a tool to vest ownership in the “right” players. The Cares act doesn’t appear to make Financialization any weaker, it is just making it more Fascist. It appears to cement concentrated wealth and power in the “right” hands.

        As for debts being written off, what matters is whose hands the ownership of assets remain in. I don’t expect to see ownership trickling down to the taxpayer or labor.

        Incidentally, according to your 2nd paragraph, the FED
        is not buying assets through the SPVs. The Treasury is. The primary thing the FED appears to be doing regarding SPVs is simply putting itself in the money stream and getting a cut. They call it funding a loan, but they are providing no funds other than those that are created out of thin air.

        • Mar 30, 2020 at 4:52 pm

          cb,

          “Incidentally, according to your 2nd paragraph, the FED is not buying assets through the SPVs. The Treasury is.”

          Well, it’s complicated. The Fed is lending to the SPVs and the Treasury is providing the equity cushion to the SPV to protect the Fed from losses of the SPV. So the Treasury is taking the loss.

  5. Brant Lee
    Mar 29, 2020 at 8:38 pm

    Everyone should use their $1200 wisely because the real layoffs begin in six months.

  6. Keepcalmeverythingisfine
    Mar 29, 2020 at 8:43 pm

    Question for all the readers: Given all that Karen has laid out here, do you really want to remain in cash for longer than say a few more months?

    • Anthony A.
      Mar 29, 2020 at 9:00 pm

      Not if the market will be going much higher!

    • andy
      Mar 29, 2020 at 9:13 pm

      Well, somebody have to.

    • William Smith
      Mar 30, 2020 at 12:49 am

      There are heaps of Black Swans flying about at the moment. Who can possibly compute all the permutations. Certainly this article has painted a very bleak picture indeed. A lot of this stuff is a bit complicated for the average person to understand. Maybe one of those black swans will dive directly into the Machiavellian plans of those “mice and men” (and snakes). Many civilizations have come and gone. It is just hubris to think this one is any different. I am reminded vaguely of the fall of Rome.

      • Icanwalk
        Mar 30, 2020 at 10:15 am

        “There are heaps of Black Swans flying about at the moment.”

        That doesn’t augur well.

      • Canadian
        Mar 30, 2020 at 11:10 am

        Nassim Taleb, who literally wrote the book on black swans, notes that none of this situation is a black swan.

        A pandemic was inevitable and expected. As was a deleveraging of an overleveraged economy.

        This is a situation where leaders at all levels failed to do their jobs and earn their pay, but are demanding everyone else pick up the tab. The claim that “this was totally unexpected” is simply a reflection of the laziness, incompetence and lack of vision of “leaders” who love entirely in the moment… gorged on Moral Hazard.

    • S
      Mar 30, 2020 at 1:03 pm

      My reply is to quote James Grant’s words in a recent interview. He is exceptionally articulate and it helps to answer your question. I especially like the last sentence:

      “We can know tendencies. We can observe patterns of behavior. We can project. So what the events of the past, the violent events of the past two weeks, have reinforced to me is the necessary humility to stay relatively diversified, relatively liquid and to choke down any thought that begins to resemble certitude. We can’t be immobilized by our ignorance of the future.”

  7. gorbachev
    Mar 29, 2020 at 8:46 pm

    Sell when others are buying and buy when others are selling.-Getty

    My guess as to why they chose to save cos instead of people

    is that all the major banks would have gone bust.They will though

    have to provide monthly money to those who’s financial life

    is over.Their saving grace and maybe our saving grace is that we

    are and will be the world’s reserve currecy.

    • Karen
      Mar 29, 2020 at 9:40 pm

      I think they must have been very concerned about pensions as well; if they’re still underfunded despite the biggest bubble since 1929, just imagine what would happen to retirees in a crash…

      Sad thing is, the crash will happen anyway; if the Fed had been a little less eager to come to the rescue every time the market wobbled, states and municipalities would have been forced to make more sensible funding decisions.

      • Cas127
        Mar 29, 2020 at 11:16 pm

        Public pensions are primarily vote buying…the state gvts would only have ever stopped if the taxpayer 80% consistently outvoted the taxeater 20%.

        But because the promises/bills didn’t come due for decades, politicians were free to do what they do best – lie.

        The Fed kept the scam alive a little longer, but this sort of macro graft is built into the DNA of “successful” politicians…their “work” mainly consists of finding new forms for it to take.

      • lenert
        Mar 30, 2020 at 12:00 am

        “How Hedge Funds Strip-Mined Kentucky’s Pensions.”

      • historicuss
        Mar 30, 2020 at 5:31 am

        Pensions may be underfunded, but that suggests there isn’t enough money.
        FIRST, they were over promised, and that is how they should be referred to.

        • normansdog
          Mar 30, 2020 at 7:41 am

          “over promised” – if I had a dollar for every time I had read this stupid line or reasoning.

      • cb
        Mar 30, 2020 at 11:11 am

        If necessary and desired pensions can be saved, to the extent the taxpayer has the stomach for it, with direct government payment. Profit and ownershipwnership skimming intermediaries are not needed and only add expense.

    • 2banana
      Mar 29, 2020 at 10:00 pm

      “Whoever fights monsters should see to it that in the process he does not become a monster. And if you gaze long enough into an abyss, the abyss will gaze back into you.”

      –Friedrich Nietzsche

      • lenert
        Mar 30, 2020 at 12:28 am

        “At that moment, man finds his character. And that is what keeps him out of the abyss.” – Lou Mannheim.

      • Lisa_Hooker
        Mar 30, 2020 at 10:35 am

        “It’s like déjà vu all over again,” – Yogi Berra

    • c smith
      Mar 30, 2020 at 4:26 am

      Yep. With the dollar @ 10 year highs, the Fed has room to print and sell a lot of dollars right now.

  8. Dan Romig
    Mar 29, 2020 at 8:52 pm

    Karen, thank you for such a lucid, and depressing report on “… the nationalization of US financial markets.”

    That Secretary Mnuchin gets to make decisions as to which businesses get taxpayer backed Fed money should make everybody wake up and see that our system is totally rigged.

    From 19 January 2017 @ Mnuchin’s confirmation hearing as stated by:

    Senator Ron Wyden:
    “Mr. Mnuchin, a month ago you signed documents and an affidavit that omitted the Cayman Island fund, almost $100 million of real estate, six shell companies and a hedge fund in Anguilla. That was not self-corrected. The only reason it came to light was my staff found it and told you it had to be corrected.”

    Senator Orrin Hatch:
    “You’ve made tremendous sacrifices to take this job, and I hope our colleagues at the other side of the aisle will come to appreciate that. You’ve certainly impressed a lot of people here. Certainly me.”

    Mnuchin was voted in 53 to 47. Yes 53 Senators voted for a man who lied to them. Oh well, it was just a few million bucks and a couple other minor details. No big deal for the person in charge of Uncle Sam’s checkbook I reckon.

    Tomorrow, the front page of every town newspaper’s business section should run with Ms. Parker Feld’s essay.

    • DanS86
      Mar 29, 2020 at 9:18 pm

      Except all the “newspapers” are mostly owned by two companies that don’t give shit about honesty and the truth, only investor returns.

      • Cas127
        Mar 29, 2020 at 11:20 pm

        Golly, if only there were an interconnected series of tubes…we could call it the Interwebs…

        Look, there is no media more viral than the internet…use it.

    • Karen
      Mar 29, 2020 at 9:41 pm

      That’s very kind of you! And a very scary thought…

      • Mar 29, 2020 at 10:16 pm

        Karen, I second Dan’s wish that every paper in the country run your article. In fact every news outlet. Thank you for shining such a bright light on this!

  9. Petunia
    Mar 29, 2020 at 8:53 pm

    The era of financialization is over.

    • cb
      Mar 30, 2020 at 11:15 am

      It’s just taking place on a grander scale and higher level, at least at the moment.

  10. historicuss
    Mar 29, 2020 at 8:57 pm

    Central Bankers are Socialists….
    The are unelected, who dictate to the rest of us, wield powers undefined, and are immune from the ill effects of their policies for they have inflation protected pensions.
    But apparently they will enrich themselves and their friends beyond any retirement compensations.
    And Wolf….
    I see that reinstated the Discount Window which is supposed to include a 50 basis pt penalty …..yet the posted rate is .25.
    Also, there is supposed to be public disclosure of those entities using the Window, but the last posting of such information was 2017.

    • CZ
      Mar 29, 2020 at 10:34 pm

      Yes, blame the “socialism” of the most right-wing capitalist bunch we’ve ever seen in office. They’re going to loot the treasury and destroy the government and the functioning economy.

      • historicus
        Mar 30, 2020 at 5:35 am

        What do they have in common? The concentration of power in a few hands without audit or review. Economic Dictating to the masses by the unelected.
        What we have here is a concentration of economic power. Socialism is a concentration of political power. Both can be misused.

    • fajensen
      Mar 30, 2020 at 3:19 am

      I think before ‘labelling’, one should read up on what the label means – unless one believes being a moron in public is a virtue!

      It could be that it is – it works for Biden and The Golden Oracle!

    • Harvey Cotton
      Mar 30, 2020 at 7:51 am

      Everybody is a Socialist if you don’t know what Socialism is.

    • Deanna Johnston Clark
      Mar 30, 2020 at 10:52 am

      Do men and women like those actually have real friends? Or spouses? Or love that isn’t a “deal”?

  11. Cobalt Programmer
    Mar 29, 2020 at 9:03 pm

    All happy families are alike, every unhappy family is unhappy in a unique way. This 2020 Covid-19 crises is very unique that even future economists will say virus caused problems to the masses. How convenient? Little did they know….

    Sometimes I wonder, how come a civilization such as Rome could fall? They are Jared Diamond answered it as a failure of Institutions. Clearly the FED failed. I still assume it is the first domino and we have enough time to prevent a Cesar from crossing the Rubicon. Economic uncertainties always lead to rise of a dictator. Hitler, Stalin, Mussolini and others come to my mind. As usually, little people are affected at the end.

    Humans are very resilient indeed. Civilizations are not. Persians, Mongolians, Egyptians, Indians, Mayans and several others still live in a difficult time. I hope US is a thousand years empire and may be beyond…

    • intosh
      Mar 29, 2020 at 11:11 pm

      “I hope US is a thousand years empire and may be beyond…”

      I’m not that hopeful. As the saying goes, a flame that burns twice as bright burns half as long.

      The US is basically a “500lbs pound gorilla” company who has dominated the market thanks to an immensely revolutionary and successful product developed 50 years ago. But like many dominant behemoth, the company becomes complacent, reluctant to foster radical new ideas and discoveries and closed to new possibilities for fear of cannibalizing the original product/idea that made them so successful, for fear that it will lose parts of what they’ve gained. So it is clinging to that legacy, convinced that this legacy will keep it on top.

      It’s ironic because scientifically and technologically, the US as a whole is totally the opposite of the above. The inertia is one of societal, cultural and political ideology.

      • c smith
        Mar 30, 2020 at 4:33 am

        “…thanks to an immensely revolutionary and successful product developed 50 years ago.”

        And what was that “product”? Our nation is almost 250 years old?

        • Shiloh1
          Mar 30, 2020 at 8:02 am

          I’m guessing here – what are nukes, petrodollar and global hegemony?

        • MD
          Mar 30, 2020 at 3:37 pm

          The credit card.

        • Karen
          Mar 30, 2020 at 5:27 pm

          The personal computer

      • nick kelly
        Mar 30, 2020 at 9:41 am

        ‘The US is basically a “500lbs pound gorilla” company who has dominated the market’

        The explanation for the rise of the US to commercial preeminence shortly after the Industrial Revolution is two fold: WWI and WWII.

        WWI left all participants except the US either bankrupt or heavily indebted to the US. But only France and Belgium were physically devastated.

        WWII left the US as the only commercial manufacturer left standing, with Germany and Japan flattened and broke while Britain and France were merely broke and partially flattened.
        US largess via the Marshall Plan did not include Britain. Ships were actually turned around in mid-ocean as the ink dried on the surrender. Bread had not been rationed during the war, but now had to be. Rationing did not end until 1954. The grudging US War Loan of 300 million was paid with interest.

        The puzzling ‘X factor’ that has many Americans why the good ole 50’s can’t return is largely the recovery of those basket cases: Germany and Japan. Not that it was easy. Sochiro Honda began by motorizing bicycles with surplus engines from generators. Workers at VW’s Wolfsburg plant had to wade around a flooded floor and were paid in groceries.

        But they’re back and they’re not going away.
        The US WWII victory bonus has been used up and some would say partly wasted.

      • sierra7
        Mar 30, 2020 at 3:26 pm

        Intosh (and others):
        What’s that line about “democracy”????
        “Eternal vigilance……..(by the citizenry?)
        Hate to say this but too much of the US citizenry is just plain asleep when it comes to politics and/or what their government is doing day to day…not just internally but all across the globe….
        “A thousand years?????”
        My line about this longevity is this:
        “The US will not last 1/2 the time it took for the Roman Empire to decline and that was approx. 750 years. We don’t have very long to go; maybe another 50-100 years.

  12. Willy2
    Mar 29, 2020 at 9:04 pm

    – it reminds me of what happened in the 1920s in Japan. Japan tried to prop up the markets after WW I. It helped for a while but the markets came crashing down any way in 1927.

    • Karen
      Mar 29, 2020 at 9:32 pm

      I think there’s a good chance it will come crashing down this time as well. JK Galbraith’s Great Crash of 1929–published in 1954–is a great read. The final chapter is called Cause and Consequence. In it he explains why he thinks that crash turned into the great depression. Galbraith’s prime suspect is an economy that was “fundamentally unsound” as a result of the bad distribution of income. He meant that ordinary people could not afford to consume the vast amount of new luxury goods that were being produced, due to the adverse effects of monopolies on wages and prices. The same has happened here, as the so-called wealth effect lured households into debt in order to live beyond their means. Real wages have stagnated while the cost of living soars.

      The catastrophic breakdown in our global supply chains has demonstrated that asset prices cannot forever outpace growth in the economy’s productive capacity. We’re about to find out what that capacity really is, and what value investors are willing to assign to it. I doubt the Fed can stop it.

      • HD
        Mar 29, 2020 at 10:03 pm

        So what exactly will the little man be facing here: hyperinflation followed by a deflationary depression, or a deflationary collapse followed by hyperinflation? Or will we somehow manage to muddle through and get the economy up to speed again with even higher doses of debt? You know, just once more, to keep reality at bay for a little while longer?
        Inquiring minds want to know.

        • Karen
          Mar 29, 2020 at 10:16 pm

          Widespread debt write-offs is my guess, with the Fed cushioning the blow. That will be deflationary in the short run, given the hit to spending and asset prices…but inflation could come sooner than expected given the supply chain shock, especially if the US$ starts falling.

          I agree with what Wolf wrote ~10 days ago; there will be a lingering psychological impact on peoples’ consumption patterns, and a strong desire to build precautionary savings. Too few households have anything to fall back on.

        • fajensen
          Mar 30, 2020 at 3:32 am

          Two possibilities,

          The first one is that ‘the little man’ doesn’t actually have to exist in an economy that is based only on lending money to each other. Once the ‘elites’ figure that out, they will segregate the country into gated communities and favelas. The 95% of the ‘little people’ ends up in the favelas, which are very much Free Markets.

          The second one is that Adults takes over the reins from the current crop of clowns, rats and sociopaths, maybe with help from the virus doing its work on the fat, old & unhealthy who happens to rule us. The USA could make a ‘Dollars for Work’-program – Anyone who wants, say, those 1500 dollars per month, signs up. No eligibility bullshit, the only requirement is that when they call for you (and they may never call) you go and fix holes in the roads, drive trucks, look after sick people or whatever they call for. Wartime mobilisation to give people a purpose and getting money into the hands of people to prime the pumps.

          Right now, the only game in town is ‘Gotta Loot it All’!.

        • Nate
          Mar 30, 2020 at 5:13 am

          AS usual people are gonna slam the barn door shut after the horses got out. I expect Ms Karen is correct, along with Wolf about the ongoing lack of consumer frenzy that is about to ensue.

      • Karen
        Mar 29, 2020 at 11:02 pm

        Once again, Cory Doctorow puts the story together brilliantly:

        https://mobile.twitter.com/doctorow/status/1244397358986608640

        • Cas127
          Mar 29, 2020 at 11:34 pm

          Karen,

          Actually, all Doctorow looks to have really done is heavily lift from this NYT article…

          https://www.nytimes.com/2020/03/29/business/coronavirus-us-ventilator-shortage.html/?2020-03-29T09%3A00%3A10%2000%3A00

          To his credit, he does link to it…once.

        • Karen
          Mar 30, 2020 at 7:17 am

          Yes he does, but the complete thread goes further, looking at right to repair, insulin pumps, and the Bork doctrine. His book Radicalized addresses the consequences of government/corporate symbiosis as it progresses toward its logical dystopian conclusion. He’s only moved a small step from where we are now, and it’s frankly awful

      • nick kelly
        Mar 30, 2020 at 10:17 am

        Great Crash is a great read. with wit as well as explanation. I’m annoyed because I can’t find my copy.
        One feature he points out: The role of the Investment Trusts. To my vague generalist understanding these sound like mutual funds. They traded just like company stocks but their only inherent value was the stocks held by the trust. Such was the enthusiasm that the price of the Trusts got ahead of their contents.
        So when the October Crash hit, company stocks like RCA or US Steel took big hits but the Trust’s could decline much faster.

        A weird feature: a Trust could spawn other Trusts and hold them in its portfolio. Kind of like a virus replicating.

        In Aftermath, Galbraith relates a Senate hearing into the Goldman Sachs Investment Trust, held in 1934 ? I Don’t have GC on hand but this is close:

        Question: At what price were shares sold to the public?

        GS: In two stages, the second being $110.

        Question: And what are they now?

        GS: approximately $1.50

        Because the GS Trust was held separately from GS, the Crash did not take GS down.
        Galbraith, writing in 1954, describes GS as having learned a lesson and withdrawing to trading in ‘the most austere securities.’

        By 2008 those lessons were forgotten. See Vanity Fair’s piece: The Week Goldman Almost Died.

        • Petunia
          Mar 30, 2020 at 11:54 am

          Some of the trusts were open to the public for investments, like mutal funds, and others were trust funded by insiders to manipulate stocks with pump and dump techniques. Most of the insider pools were of short duration, lasting only months.

          Remember, the brokerage houses were partnerships and partners sheltered their equity capital.

      • cb
        Mar 30, 2020 at 11:28 am

        I would argue that it was “fundamentally unsound” due to a bad distribution of wealth and power.

        • Karen
          Mar 30, 2020 at 5:30 pm

          He said income, but I think he meant wealth and power. In any case, I agree with you.

      • cb
        Mar 30, 2020 at 11:34 am

        “The catastrophic breakdown in our global supply chains has demonstrated that asset prices cannot forever outpace growth in the economy’s productive capacity. We’re about to find out what that capacity really is, and what value investors are willing to assign to it. I doubt the Fed can stop it.”
        ____________
        Asset prices have been tied to dollar creation, not to the economy’s prouctive capacity. Once power and wealth has been sufficiently concentrated, it doesn’t matter what value investors are willing to pay for capacity if the value investors can’t afford it anyway, and if the capacity is not for sale.

  13. DanS86
    Mar 29, 2020 at 9:15 pm

    Weimer, Weimer…

  14. Michael Engel
    Mar 29, 2020 at 9:38 pm

    1) Climate change mayors evict filthy tent cities. They shut water and electricity on open business. The largest cities pulse is dead.
    2) God food protect citizens from Wuhan virus sneaky attack.
    3) Sat night is the most important night for restaurants. It brought most of money.
    4) Restaurants owners, highly leveraged, will keep the kitchen open.
    They will keep a skeleton work force for online deliveries and the takeout window.
    5) Volume is down more than 80%. The Wuhan virus put restaurants in
    coma for over a month. They can die without a fault of its own, Either the owners, or their employees, or both will soon go bust. The $2T crumbs will never do much to rescue them.
    6) To save dollars, workers will be allowed to sleep in the restaurant basement.
    7) Those workers will spend 24 hours together in social crowding. Since its illegal and dangerous, they must agree to take a pay cut.
    8) Once locked in, they cavemen will become submissive. Otherwise, a worker bitching around, the owner can punish and evict her to the streets. Police is too busy fighting the virus. The mayor prefer to keep people like her out of sight.
    9) Less restaurants, more god food will keep American more healthy. But on the other hand, the Wuhan invaders will renew slavery, after 150 years.
    10) $2T pharma in repetitions, ordered by the treasury, will become the new norm until the final victory. America will always solve their problems with higher doses of explosive TnT dollars.
    11) $2T^10 ==> is a new Weimar Republic. Its a bomb that bombed itself.

    • lenert
      Mar 30, 2020 at 12:38 am

      You mean the Eucharist or “these tapas are divine!?”

      (probably past my 20%)

  15. A
    Mar 29, 2020 at 9:42 pm

    Goverment-backed handouts for the rich.

    Harsh predatory capitalism for the middle class taxpayer.

  16. Bobber
    Mar 29, 2020 at 10:07 pm

    So what happens when the Fed puts $10T of asset on its balance sheet over the next year and the assets lose 50% of their value? Does the Fed just forgive the debts, print money for itself, and make itself whole?

    There is a murky relationship between the government and the Federal Reserve. The responsibilities of the parties is not clearly stated. Something tells me the “powers that be” like it that way, as it gives them more flexibility to do what serves their own interests.

    • Robert Miller
      Mar 29, 2020 at 10:30 pm

      That’s THE question!

    • fajensen
      Mar 30, 2020 at 3:44 am

      So what happens when the Fed puts $10T of asset on its balance sheet over the next year and the assets lose 50% of their value?

      Your pension fund buys it at par, before it loses 50% of its value?

      They wrap it up in some High Yield fund and sell it all to Japan, before – yada yada?

      They will get away with it!

    • historicus
      Mar 30, 2020 at 5:40 am

      “There is a murky relationship between the government and the Federal Reserve.”
      An understatement.
      The Fed hides the federal deficit borrowings with fake Treasury demand and a shoe box, slush fund called the balance sheet.
      Has anyone noticed that central bankers all over the world have driven the cost of borrowing, for the governments that empower them, to zero, to the delight of the governments.

      • Cas127
        Mar 30, 2020 at 1:26 pm

        H,

        Exactly.

        As gvt debt to GDP figures have soared (hiking default risk), the interest rate risk premia have “mysteriously” vanished – at the very time they should be soaring too.

        Answer…the Fed, which by printing money backed by nothing tangible, buys directly/indirectly the gvt debt.

        And so it can convert gvt debt (which it funds) into citizen inflation (compare rent/home costs over the years).

        The intermediary mechanism is interest rates and we have effectively been under ZIRP for 20 yrs.

  17. CZ
    Mar 29, 2020 at 10:11 pm

    Tempting to go long some of these crony companies — GS, RTN, HAL — but who’s to say the trillions won’t go directly into the execs pockets, rather than into the businesses? Corruption is tricky to analyze.

    • lenert
      Mar 30, 2020 at 12:44 am

      The law says they can double their pay! When, in 40 years, did you ever get a 100% raise?

      • p coyle
        Mar 30, 2020 at 9:13 pm

        maybe when my allowance went from $1 a week to $2…but that was a little over 40 years ago…

  18. Resjudicata
    Mar 29, 2020 at 10:25 pm

    Okay: If a normal person has some cash at this point, where do you propose they put it to keep it safe? Is cash the safest place to keep it since it seems like deflation is happening right now. What do you watch for to determine when to deploy it into assets? Asking for a friend. Thanks

    • Karen
      Mar 29, 2020 at 10:47 pm

      The value of cash is determined not by its yield, but by the option it gives you to purchase other assets as their prices fall. By that logic, the more expensive (overvalued) everything else is, the more undervalued is cash.

      In plain English: cash is king right now.

      Covered call strategies also benefit from rising volatility–but you need to focus on companies with bulletproof balance sheets. Van Hulzen has a good one.

      As for gold–attractive in principle, but not a layup in execution, given the tightness of the physical market vs. required collateral for popular ETFs. I worry investors will lose confidence in these instruments if there are recurring challenges with collateral. It’s worth remembering that the government outlawed private holdings of gold in 1932…until the 1970s.

      • MD
        Mar 30, 2020 at 3:47 pm

        Yes however in the 1930s one couldn’t login in to your online trading account and sell your gold in 60 seconds to someone in Russia, china or any other place wherein no such legislation exists.

        Ergo: no need to worry at all that such legislation will be re-introduced, as it would be utterly futile.

        • Karen
          Mar 30, 2020 at 5:37 pm

          The government has already asked for client records from the bitcoin exchanges. You don’t think they would do the same for gold?

          https://paladinadvisors.com/bitcoin-bonanza/

          Not to say they’d get it all, of course not. But it would have a chilling effect on the retail market.

    • DawnsEarlyLight
      Mar 29, 2020 at 10:47 pm

      Become a lobbyist, and get your real money’s worth.

    • Mar 29, 2020 at 10:53 pm

      James Grant did a good piece today, Nobody Knows Anything. I can only tell you what I am doing. That’s all anybody can do, this crisis is off the charts. I have decided the FEDs reaction will actually make things much worse. Minority opinion.

      • Cas127
        Mar 29, 2020 at 11:43 pm

        “the FEDs reaction will actually make things much worse”

        At some pt (maybe this pt).

        The Fed isn’t magic…it is just desperate and corrupt.

        The printing used to “retire” bad debts doesn’t vanish…it manifests in inflation *somewhere*…and not just in baloney equity mkt valuations…rents have been aggressively escalating ever since Bubble Fix #1.

        But because they appear unrelated (but linked together via ZIRP) the public does not exact a political price.

        But the same scam can only be run so many times.

        • Mar 30, 2020 at 10:29 am

          Fed is feeding the deflationary crash. Einstein said insanity is doing the same thing and expecting different results. Doing the same thing and expecting the same result is hubris. Lowering interest rates will prop up the energy supply bubble and insure zero dollar crude. Blow back through corporate debt will spread despite Fed buying HYG, tail that wags the tiger. 4T in a 400T market? They put $1000 in your account? Then they sneak in later and give you a ten spot for two twenties? I am playing the turn, you don’t need to get the choreographed stock market dance right to profit on the turn. Profit implying avoidance of the state of destitution.

      • Iamafan
        Mar 30, 2020 at 10:22 am

        I have to agree with you on NOBODY KNOWS ANYTHING.

        We only have our personal opinions about viral epidemics.

        Regarding monetary and fiscal stimulus, ask yourself a question, what would YOU do given the situation? Too many experts that just I just stopped listening and just looked at the raw data.

    • fajensen
      Mar 30, 2020 at 4:01 am

      What do you watch for to determine when to deploy it into assets?

      You watch for some even shittier news, where some specific dividend-paying stocks, that you have carefully researched doesn’t drop much on its arrival (maybe 1-3%). Then we might have the bottom – for that particular stock. The second thing to want to watch is volatility, you want volatility to die down, for a while. These +/- 6% on the indexes are fine for trading, but, they tell you that the dice are still being thrown and its dumb luck it you get an investment right. Third thing, if you are really patient (and I am Not), are opinion pieces on why investing is a terrible idea. I personally don’t think we will get these this time.

      Look for businesses for sale or bankruptcy auctions. Maybe there is a nice business near you, which you could live on the proceeds off, that is now not doing very well and is going for cents on the dollar. Maybe one can buy the assets before the bankruptcy?

      The latter is what I am doing, I too old to still be working with idiots and sociopaths. Being extremely lucky, wife & I can live just fine for 1/5 of what I happen to make now.

      Always Remember, that good assets (even Gold/Silver) will be sold off cheaply when people have their faces ripped off in margin calls.

      Anyway, this is how I see it. Take it with some salt, I have been self-administering some quinine tonic with a good deal of gin and ice!

      • Karen
        Mar 30, 2020 at 8:54 am

        Kudos fajensen! Quinine contains (or used to contain) chloroquine. A good home remedy in trying times, but only when catalyzed by gin and ice…

    • Deanna Johnston Clark
      Mar 30, 2020 at 11:01 am

      I’ve always done this with any income…spend it on the young, on their well being. Cast your bread upon the waters..I’m 72 and it never failed. There’s an Androcles and the Lion effect built into the universe.

      • cb
        Mar 30, 2020 at 11:53 am

        Good call.

  19. Robert Miller
    Mar 29, 2020 at 10:29 pm

    Fuckedy, fuck, fuck, bullshit, dickheads, c$_ts (couldn’t quite bring myself), aargh, FUCK, fucking arseholes. How’s that for a summation??

    • Karen
      Mar 29, 2020 at 10:48 pm

      Thank you for that ;-)

    • Michael Gorback
      Mar 30, 2020 at 1:39 am

      We need a mug with that quote.

    • Clete
      Mar 30, 2020 at 11:08 am

      TL; DR

  20. GotCollateral
    Mar 29, 2020 at 10:36 pm

    Until the the supply of claims on future dollars is less than the actually dollars in supply, you will not see any meaningful inflation outside of cartel like industries (i.e healthcare™ and higher indoctrination).

    These bailouts are insiders baseball, but if things get worse, it won’t stop the population from finding out where these insiders friends and families live and depositing some lead into them…

    • DawnsEarlyLight
      Mar 29, 2020 at 10:49 pm

      GotLead?

    • Gold is just..gold
      Mar 30, 2020 at 12:33 am

      “…it won’t stop the population from finding out where these insiders friends and families live and depositing some lead into them…”

      Never happen. Too stupid (otherwise would’ve happened by now).

      But never fear..they WILL slaughter each other.

      • Mar 30, 2020 at 3:09 am

        Right… no banker/politician/business man ever in history has been drawn and quartered when things got serious enough because it required all the ignorant masses to do so in the midst of them killing each other, not just the few who were angry enough to do the drawing and quartering in the midst of the chaos… lol

        • historicus
          Mar 30, 2020 at 5:43 am

          They pay fines. A percentage of their take.

        • VintageVNvet
          Mar 30, 2020 at 8:54 am

          So you don’t consider the actions of the mob during the French revolution having killed a bunch of the aristocracy history?
          After seeing way too much of it, I don’t consider violence anything other than individuals getting their ya ya out, so I would really prefer we do it right and for the long term.
          Start with ”Clean House, Senate Too,” basically voting out all incumbents until we get political folks in office who do what their oath charges them to do, be servants of We the People/Public, and NOT just puppets of the oligarchy while lining their own pockets at our expense.
          There are good and competent people in both parties, and I do believe some of them have not yet taken the corporate poison.

  21. Fred Flintstone
    Mar 29, 2020 at 10:39 pm

    What the fed does not seem to understand is that in saving the USA from the perils of a depression it is killing the USA and the culture that created the wealth. The cure is far worse than the disease. Our kids have learned (not learning) that it is OK to spend everything and then turn to Uncle Sam for help a day into a problem. Not a week, month….one day. Self reliance is considered stupid by the new generation. It all about the team and reaching your share of the whole. We used to call this communism.
    When you eliminate price discovery, business risk, reward incompetent management, destroy not harm savers….destroy, force consumers to consume unearned and unwanted goods and services and a variety of other capital related factors…….it converts the USA into Russia. It will only take a few more years until what is left of what FDR provided us will be gone. The emperor will have no clothes. I’ll be gone but I feel partially responsible for allowing it to happen. So sad.

    • sierra7
      Mar 30, 2020 at 3:52 pm

      Fred Flinstone:
      “….force consumers to consume unearned and unwanted goods and services and a variety of other capital related factors…”
      Nobody, but nobody “forces” anybody to buy useless crap. The beauty of the system is there are just so many people that will buy the “useless” crap without “forcing”!
      That’s the system!
      And, that same system has the education system that channels people to consume useless crap.
      There are many, many others who have not bought into that paradigm.
      And there are still many of us still alive that lived through the Great D. and still know how to conserve our resources and have taught out families to do the same.
      Too many people are just plain sheep. And are easily led to (economic) slaughter.
      I find this time in history very fascinating but admit that there is no easy solution now.
      We as a people have let the country fall into the hands of the “money changers of the Temple” for too long and now they are going to take the country down with them.
      We may be on the edge of another “Great Transformation” when this virus scare is over. Too many are having to re-vision their job and personal lives. And, the country is just plain economically bankrupt.
      Stay safe and healthy!

  22. Michael Hogan
    Mar 29, 2020 at 10:48 pm

    Too connected to fail!

  23. Unamused
    Mar 29, 2020 at 11:01 pm

    Corporate capture of the US financial system isn’t “nationalization”. It’s totalitarianism by favored corporations, and there is nothing “socialist” about feudalist racketeering by an organised crime syndicate.

    • Karen
      Mar 30, 2020 at 6:58 am

      You said it.

    • Paulo
      Mar 30, 2020 at 7:34 am

      Unamused,

      “Fascism (/ˈfæʃɪzəm/) is a form of far-right, authoritarian ultranationalism characterized by dictatorial power, forcible suppression of opposition, and strong regimentation of society and of the economy which came to prominence in early 20th-century Europe.”

      Seems pretty prescient to me what is going on right now. What you see is NOT Socialism. Trade wars, tariffs on allies, China virus, taking over industry for supporters and like minded is Fascism.

      Karen, Great Article!!!! Terrifying, though.

      Right now people are too afraid to come out and riot. In 1 year? 2 years?

    • Petunia
      Mar 30, 2020 at 9:58 am

      It’s simply fascism.

      • Mar 30, 2020 at 12:16 pm

        Or a fascist economy, the rest of it is window dressing. They want you back in the factories even while the bombs are falling.

  24. Mar 29, 2020 at 11:01 pm

    Okay without mentioning the corruption in 2009, which came about from the Iraq war in 2003. Some people want to compare this to the French Revolution, while half of America (passionately) idolizes our aristocracy. Les Miserables? zero APR, 3 free monthly payments, 3 months deferred?? I just think we are a long long way from doing anything about it.

    • Unamused
      Mar 30, 2020 at 8:18 am

      half of America (passionately) idolizes our aristocracy.

      How easily the slaves have learned love the con men’s lies, and shout them. And to love their masters’ chains, and forge them. And to love their butchers, and do their slaughter for them.

      Ich kann nicht so viel fressen, als ich kotzen moechte – I can’t eat enough to puke as much as I would like to.

      • Sydney Collin
        Mar 30, 2020 at 9:42 am

        “A really efficient totalitarian state would be one in which the all-powerful executive of political bosses and their army of managers control a population of slaves who do not have to be coerced, because they love their servitude.”

        ― Aldous Huxley, Brave New World

  25. Willy Winky
    Mar 29, 2020 at 11:08 pm

    You may think you are in the midst of a storm already, but this is the calm part

  26. Joseph Zamrin
    Mar 29, 2020 at 11:23 pm

    I keep coming back to the idea, and forgive me if it’s been overplayed on the forums, that it would be much less costly to give every taxpayer $1M. It could be paid out and/or amortized over 10 years and given only to those with net worth below some threshold. Certainly more beneficial from multiple angles I think and perhaps unrealistic for some reasons.

    • Mar 30, 2020 at 12:38 am

      Just extend unemployment to everyone who paid payroll taxes and gets laid off, including for full-time and part-time gig workers when they run out of work. That would be a heck of a lot cheaper than this crap already passed.

      And by golly crank up the health care system because this is a health care crisis.

      And then forget the rest of the bailout corruption fest. Let companies do what they do. If they file for bankruptcy, fine. Chapter 11 restructuring has cured many zombies. Landlords are going to get used to losing money on their properties for a while… but they’re adults, they can handle it. CMBS and RMBS are going to be toxic for a while, so what.

      • Karen
        Mar 30, 2020 at 7:25 am

        I’m glad you mentioned health insurance, Wolf, because that’s going to be the straw that broke the camel’s back. The unemployment benefits don’t look too bad on the face of it, but are wholly inadequate to cover the additional costs that are coming for those who get sick. And now they’re projecting a 40% increase in premiums, which is out of the question. Then you have the loss of retirement assets and inability to save out of those benefits…

        • Paulo
          Mar 30, 2020 at 7:54 am

          Speaking of Health Insurance, hey, I haven’t heard one slag today about Canada’s socialised medical system. Must be a record.

          What has it done lately? It works….. and for 1/2 the cost. Even member doctors have a union to negotiate on their behalf.

          Instead of scratching for a continual profit, working in competition against other venues, hospitals, and provinces, our much maligned socialist govt has been steadily having news conferences 6 days per week (led by the Health Officer), has been informing the population about Covid-19, and where excess medical supplies (including ventilators) are being pre-positioned, and explaining how many empty hospital beds there are in case of an infection surge. They are even laying out plans for care in remote First Nation communities and have been working with the FN health officers to get out ahead of a possible infection in their communities.

          Guess what, a 5 year plan is better than no plan at all.

          I hope when this is over US citizens realise that “for profit” health care does not produce efficiencies. It is designed to produce profits. My freaking sister and her doctor neighbour (in the US) are sewing surgical masks at home, for Gods sake. Every day the doctor takes them down to her clinic. My sister was crying on the phone last week, “What is going on, this is America”.

        • eg
          Apr 1, 2020 at 4:00 am

          Paulo, what is going on in America is the cosmic hilarity that ensues when a privatized health system meets a genuine public health crisis.

      • Unamused
        Mar 30, 2020 at 8:42 am

        And by golly crank up the health care system because this is a health care crisis.

        The easiest way to get away with robbery is to burn the house down. It creates the needed distraction.

        It’s easy enough to do when the health care ‘system’ is impaired and the ‘response’ to the crisis can be delayed.

        • polecat
          Mar 30, 2020 at 12:50 pm

          the robber($) can be put to the torch as well ..

      • Steve
        Mar 30, 2020 at 9:21 am

        Wolf, I expected better from you. Using logic and reason is just not the American way these days.

        Keep on keeping on. :)

      • MF
        Mar 30, 2020 at 9:33 am

        Why do you want to make them wait until laid off?

        The majority of injured workers will cling to reduced hours, reduced pay, or a combination of both. As bad as it is for the minority who get thrown off the rolls altogether, the pain is not limited to them by a long shot.

        I suspect the “health care” system will be fine. Not only did it get a bailout, but people who lose jobs lose coverage. They’ll have to suffer at home. Nice trick, eh?

      • DawnsEarlyLight
        Mar 30, 2020 at 2:25 pm

        That’s what we used to call a ‘country breakfast’. Wake up early in the morning, brush off the remnants of dreams, and accept the fresh new reality of a new day. Now, time to get to it mister!

        • Karen
          Mar 30, 2020 at 5:43 pm

          Sounds about right to this midwesterner.

  27. Anthony
    Mar 29, 2020 at 11:54 pm

    One thing economists have pointed out in the past, has been America’s dependance on petrodollars to help pay for USA imports. Now with oil at $25 and nobody using the stuff for months, will it mean that there is little cash available for the USA to pay for imports? I know it’s a complicated subject, so I’m just raising the question.

    Oh, as well…. Uber…In my city, nobody is using taxis, so ,,,,,,,,,,,,,,,,?

  28. lenert
    Mar 29, 2020 at 11:56 pm

    “The thing about corrupt administrations is that they are also, quite often, incompetent.”

  29. lenert
    Mar 30, 2020 at 12:19 am

    Also the signing statement for the bill allows the president to suppress Inspector General reports to congress any time agencies refuse information requests. (Have these things ever survived a supreme court challenge?)

  30. Rcohn
    Mar 30, 2020 at 12:26 am

    I called the FED on Thursday to see if I could sell my securities to them. I told them that I had considerable stocks and bonds in street name at a few brokerage firms. They said too bad,so sad,I then told them that I had some old(antique) sports equipment . I described this equipment ( an old Rod Laver tennis racket, some old Tommy Armour golf clubs and some balata Titliest golf balls) . After a couple minutes of silence they stated that they could buy these assets under one of the special vehicles created in the recent bill, but would not pay a penny over $2 million, but I would have to pay for shipping.

    • lenert
      Mar 30, 2020 at 12:52 am

      Or you’re the CEO of a crumbling real estate empire calling the Treasury Secretary. All you have is an old painting of the boss hanging in the back bar in Florida and a Tim Tebow helmet. Oh – and unlimited pardons.

    • MC01
      Mar 30, 2020 at 4:37 am

      Good luck finding a carrier that will ship your stuff anywhere these days.

      But somehow the bills always get here on time…

    • Karen
      Mar 30, 2020 at 7:59 am

      This is priceless.

  31. DeerInHeadlights
    Mar 30, 2020 at 12:27 am

    I thought this piece was going to be about the stock-selling senators…

    • Unamused
      Mar 30, 2020 at 6:11 am

      What’s a few millions in corruption when there are trillions? Stock-selling senators just get lost in the noise of the vast corruption they enable.

  32. pdxmtb
    Mar 30, 2020 at 12:56 am

    The Fed is floating buying stocks via ETF on CNBC now.

    • Ensign_Nemo
      Mar 30, 2020 at 2:50 am

      The Swiss National Bank bought ETFs for quite a while and amassed about $100 billion of stocks, mostly US stocks, as a result. The precedent has been set.

      Japan did this with government bonds to the point that the entire bond market was essentially frozen – there were some days where nobody bothered to trade ANY Japanese government bonds because the BOJ was effectively setting the price at whatever level it wanted it to be.

      At some point, if the Fed continues to simply print money and then buy bonds and buy stocks with it, the Fed will become the majority owner of both US government debt and US stocks. Traders will only look at what the Fed is doing and mostly ignore the real economy.

      This seemed a bit too “far out” to discuss – an idea outside the “Overton window” of ideas, a conspiracy theory, a madman’s ramblings – until now.

      The Fed is clearly willing to throw at least $10 trillion into the bond and (now) the stock markets.

      That’s getting close to the same order of magnitude needed to seize effective control of all financial markets. If they create $100 trillion and buy stuff with it, then they would have so much leverage over both the US government and US public corporations that they’d be able to dictate terms to them. That’s five times our GDP, roughly, but it’s no longer inconceivable that the Fed could actually do that.

      We used to worry that communism would come to America by a Soviet invasion and that a Central Committee of the Politburo would rule over us.

      Instead communism is coming to America by the dereliction of duty of our democratically elected representatives, and an appointed committee of central bankers will rule over us.

      Remember that the classic economic definition of communism is the ownership of the means of production by the government. We are getting there pretty quickly.

      • historicus
        Mar 30, 2020 at 10:02 am

        “The Swiss National Bank bought ETFs for quite a while and amassed about $100 billion of stocks, mostly US stocks, as a result. The precedent has been set.”

        front running…used to illegal
        insider trading……used to be illegal

      • historicus
        Mar 30, 2020 at 10:17 am

        Ensign…
        EXACTLY.
        Central Banking is a cabal … of the unelected….who have taken control of all the markets of the free world.
        A backdoor play

      • MC01
        Mar 30, 2020 at 11:00 am

        I’ll never tire of typing this, and now that work has really stopped I have even more time to type.
        The Banque Nationale Suisse (BNS) has what I can only call a hybrid mandate. It’s part central bank and part hedge fund for its shareholders, which include the Cantonal governments, the Federal government and several highly secretive entities chiefly based in Germany. Don’t get me started on how the German and Swiss economies are joined at the hip…

        Like all very large hedge funds the BNS has an extremely complicated and ever-shifting portfolio and risk management structure and like so many hedge funds based in favorable legislations the BNS likes to keep its cards close to its chest: what we know about their activities chiefly comes through their activities abroad, as defined for example in US SEC filings. The end of the year report by the BNS was already hazy to say the very least in the 80’s and has got somehow worse as its purchases have extended not merely all over the world but to financial products that didn’t even exist back then.

        So does the BNS trade ETF, bonds and stocks to manipulate the market or to turn a profit for their shareholders? It’s impossible to tell, but one would think if they really wanted to manipulate markets they’d start from Zürich and Frankfurt, not New York. ;-)

        • Dan Romig
          Mar 30, 2020 at 2:13 pm

          A well done and star-studded movie from 1980, The Formula, explores secret connections between Germany and Switzerland.

          The plot pivots around a secret synthetic fuel formula developed by the Nazis, and the story begins at the end of WWII. Filmed in Berlin, St Moritz & Hamburg; with George C. Scott, Marlon Brando & John Gielgud.

          For those with time on their hands, it may be worth checking out.

  33. CRV
    Mar 30, 2020 at 1:32 am

    We’re witnessing “Atlas Shrugged” in real time. Althoug not in the same order of chapters it was written in.
    Even before C19 it was noticable that CEO’s left their posts more then usual. John Galt’s? What’s left consists of cronies who brush against the money/power hoping some will stick. And boy what sticky money will be created?

    • Off The Street
      Mar 30, 2020 at 9:14 am

      Yet again, life imitates the movie Men In Black.

      All those CEOs resigning and turning over their companies to the patsies and shareholders and mutual fund investors before SHTF.

      “…and the last one gets stuck with the check.”

  34. Patrick
    Mar 30, 2020 at 1:34 am

    So a few more cycles of panics followed by euphoric highs until the final hyperinflationary hockey stick move up in both markets and precious metals? Just like Venezuela’s IBVC from 2013 thru 2017.

  35. Jonas Grimm
    Mar 30, 2020 at 2:25 am

    Neo-feudalism is now a thing. All we need is an emperor and we’re set!

    How ironic that I grew up in the sunset days of our empire, and now, as middle-age creeps up, I get to be here to watch it burn down. I have nothing but antipathy for the people who expect my generation to fix this mess.

  36. GP
    Mar 30, 2020 at 3:12 am

    Not a fan of Goldman Sachs Manequin, but aren’t you misplacing the blame here on treasury rather than the Fed?

    Treasury after all is trying to give out stimulus checks, provide loans & grants to small business, increase unemployment benefits and other things that support people and communities.

    Fed otoh, is just taking in the garbage assets of banks and hedge funds and providing top dollars in return.

  37. c smith
    Mar 30, 2020 at 4:03 am

    Remember the inventors of the SPV? Enron. Enough said.

  38. c smith
    Mar 30, 2020 at 4:15 am

    “America has never run deficits of this magnitude (on the order of 30% of GDP) in the context of globalized capital markets and significant foreign ownership of US debt. Investors will re-evaluate their US holdings in the context of this new paradigm, once they are able to wrap their minds around it. And when they do, we expect to see a significantly weaker US dollar in our future.”

    So heavily indebted foreigners are scrambling for dollars to pay their debts, pushing the value of the dollar to 10-year highs on world markets. Great! The Fed is now doing exactly as it should – creating massive amounts of dollars to SELL at a high price. All the Cassandras worried that the value of the dollar is going to plunge as a result of money printing are barking up the wrong tree. It’s all a RELATIVE game, and right now the U.S. is still the very best house in a (very bad) world neighborhood. The rule of law, transparency, leadership in bio and other technologies and military might still count for a LOT. It’s the freedom dividend all over again!

  39. Michael Engel
    Mar 30, 2020 at 5:22 am

    1) After Trump win election the $2T^10 will stop.
    2) The stock market will drop !!
    3) No hyper ventilation, USD > 120.
    4) Trump is deflation king.

  40. Michael Engel
    Mar 30, 2020 at 5:54 am

    Moderation : Trump will fight the debt virus.
    He will cleanse debt & obligations. He is the only one who have the
    guts to go against the trend, to dissect debt, to change our character
    and reboot our country for another 50 years.

  41. David Hall
    Mar 30, 2020 at 6:16 am

    Cutting taxes then bailing out airlines and restaurants is inflationary.

    Nations banned export of medicines and medical supplies. Kazakhstan banned the export of wheat. Food is more important to national security than medical supplies.

    S. Korea has its factories open and is increasing exports. They have a decent containment program.

  42. Mar 30, 2020 at 7:41 am

    As the author ( Karen Parker Feld )
    and Wolf Richter keep saying:
    > Nothing got fixed, far from it.

    Suppose our economy had just 2 people:
    a borrower and a lender.

    The lender is the top, the master;
    the borrower is the bottom/slave.

    Our borrower is homeless,
    strung out, and sick as hell.

    Our lender gave our borrower his fix,
    but nothing got fixed; he’s an enabler.

  43. Unamused
    Mar 30, 2020 at 7:45 am

    Now even the fig leaf is gone.

    I have long predicted that someday the racketeers would dispense with even the merest pretences of fairness and democracy. I was just hoping, this one time, that I would be wrong.

    “The real difficulty is with the vast wealth and power in the hands of the few and the unscrupulous who represent or control capital. Hundreds of laws of Congress and the state legislatures are in the interest of these men and against the interests of working men. These need to be exposed and repealed. All laws on corporations, on taxation, on trusts, wills, descent, and the like, need examination and extensive change. This is a government of the people, by the people, and for the people no longer. It is a government of corporations, by corporations, and for corporations.”

    Diary entry, 11 March 1888, Rutherford B. Hayes, 19th President of the United States.

    For the rich men thereof are full of violence, and the inhabitants thereof have spoken lies, and their tongue is deceitful in their mouth.

    Micah 6:12

    • Karen
      Mar 30, 2020 at 8:02 am

      Very well said. Matthew Stoller’s Goliath narrates how the we slayed this monster once before. David’s name: Wright Patman

      • Unamused
        Mar 30, 2020 at 8:31 am

        Noch weiz ich an im mêre | Daz mir ist bekant,
        Einen lintrachen | Sluoc des heldes hant,
        Er badet sich in dem bluote: | Sîn hût wart hurnîn,
        Des snîdet in kein wâfen: | Daz ist dicke worden schîn.

        And I know even more, more I can tell.
        Once, by his violent hand, a dragon fell.
        He bathed in its blood, grew hard, and can’t be slain.
        And many have seen this again,
        And yet again.

        – Das Nibelungenlied

    • Dan Romig
      Mar 30, 2020 at 9:18 am

      Funny how some ideas and principles keep repeating.

      Two weeks before he was killed in 1881, President Garfield stated:

      “Whoever controls the volume of money in our country is absolute master of all industry and commerce … and when you realize that the entire system is very easily controlled, one way or another by a few powerful men at the top, you will not have to be told how periods of inflation and depression originate.”

      • historicus
        Mar 30, 2020 at 9:59 am

        maybe thats why they shot him.
        be careful

    • Petunia
      Mar 30, 2020 at 9:39 am

      No mention of the senator from the great tax haven state of DE. One side thinks he’s just dandy, while overlooking all the tax cover big business has accrued during his long tenure in public service.

      • csmith
        Mar 30, 2020 at 5:50 pm

        Joe Biden…Senator from the great state of Unaware…

  44. former
    Mar 30, 2020 at 7:47 am

    Good article!

    One thing I wish is, that everyone who mention so called fed, would use their proper name: private banking cartel or heads of private banking cartel. Always in every sentence.

    This fed(deral) insinuation just rubs me the wrong way. Every single time.

    • Petunia
      Mar 30, 2020 at 9:47 am

      When the fed was created, they when to great lengths to design it as a federalized system. The 13 districts mimic the original 13 colonies, and they deliberately made it look like the power was dispersed to the 13 federal reserve districts. The look of being democratic while not being democratic at all, was the trick to getting the act passed.

      • historicus
        Mar 30, 2020 at 9:52 am

        The NY Fed is the “working arm” ….. and the conduit for those plugged in.

      • Wisoot
        Mar 30, 2020 at 5:21 pm

        Petunia – Karen Hudes writes – the Bankers replaced the Constitution with a second secret constitution. The US Congress, acting under the second, secret Constitution,has refused to follow the Constitution of 1789. That is why we are now in interregnum.

        For more details search for the below phrase

        karen hudes debra earley july 12 2016

    • historicus
      Mar 30, 2020 at 9:56 am

      The Federal Reserve.
      They arent “Federal” and they have no “reserves”.
      That should set one’s antennas in high alert to a scam.

      The Fed has THREE mandates and they have been in constant violation of the 2nd and 3rd.
      Stable prices….and they promote inflation at a rate that rips 22% to 28% off the dollar in just ten years (2-2.5% inflation)
      Moderate long term rates…..moderate means NOT EXTREME, and record lows and flat yield curves are indeed in place because the Fed allows, in conflict.

    • cb
      Mar 30, 2020 at 12:14 pm

      Same for me when QE is used as a reference.
      It should be called what it is ….. money creation out of thin air

  45. billy
    Mar 30, 2020 at 8:13 am

    Well, if “socialism” “doesn’t work”, we should find out pretty soon.

  46. Joe in LA
    Mar 30, 2020 at 8:42 am

    I really liked this article, thank you. I was fortunate to be all cash before this madness started and, after reading this, I am inclined to remain so.

    Question: with cash, does it makes sense to hold multiple currencies, and if so, which ones?

    Again, thank you for this wonderful article!

    • Karen
      Mar 30, 2020 at 9:20 am

      I have a lot of sympathy with what C Smith says above–it’s not obvious that the alternatives to the USD will quickly attract investors, given myriad and serious problems elsewhere. I have my doubts that the euro can withstand this shock. That said, the difference between the US and other major countries is that we rely far more on the kindness of strangers–and at some point that kindness is going to hit its limit. We are a net debtor that has abused the exorbitant privilege of paying debts in our own currency.

      It’s unclear what’s going to happen in the energy sector (there are so many countervailing forces) but the risk is that we will see a rising trade deficit if/when the shale industry implodes. Unless consumption collapses faster, that is…

      I would think in terms of a basket of assets that’s correlated with a short US$ position. Careful on commodities though.

  47. wkevinw
    Mar 30, 2020 at 8:48 am

    “Chapter 11 of the bankruptcy code was designed as a mechanism to keep companies operating while they restructure their debts. However, as Wolf Richter points out, that would mean wiping out the shareholders and replacing the company managers.”

    Yes, this is what should happen.

    The Fed’s third unspoken mandate: “deflation must NOT happen”. So, they go for bailouts (which also is nice to benefit their stakeholders)

  48. Unamused
    Mar 30, 2020 at 8:50 am

    Stock futures are up.

    Would anybody here really be surprised to see the DJIA go to 40,000, even as the country falls to ruin? Would you really?

    Maybe it won’t be that way. Maybe the DJIA will fall to zero. Your masters have shown they don’t need the economy, so maybe they don’t need the stock markets either. Maybe all they need is what they already have. And they have plenty of that.

    One never knows. Does one?

    • wkevinw
      Mar 30, 2020 at 9:14 am

      I don’t think “ruin” would be in the cards during a big bull stock market run.

      However, something between slow rot and stagnation in the real economy could happen with that kind of stock market action.

      I think stagnation could describe the real economy for ~20 years. If it’s all relative, the US is the best dirty shirt. The rest of the world has been even more stagnant for 20 years.

      Best to all and stay safe.

      • lenert
        Mar 30, 2020 at 9:54 am

        We (the little people) still haven’t gotten over the last crisis. The ARRA was not large enough to replace the demand lost by the housing collapse. Only one guy went to jail, bogus derivatives are still legal, the minimum wage hasn’t been raised (federally) but now CEOs will be getting those raises once we’ve refloated their companies – and their options. And let’s make sure nobody spends that $1200 on movies and beer while they’re stuck at home during a pandemic hoping not to die while wondering how to make their $2200 sub-prime mortgage payment. Oh, and the people of Flint still have toxic water coming out their pipes. It’s an obscene inversion of priorities and it’s what the big people want. /r

  49. Bart
    Mar 30, 2020 at 9:14 am

    This is a very informative article Karen, thank you for taking the time to write it. The pain, suffering and loss of life is heartbreaking and I cannot imagine the stress of our nations healthcare workers right now working with improper safety equipment and in environments that do not have the capacity to meet demand. I would not be surprised when this is all over if the Unions do not attempt to sign up nurses and doctors alike.

    What I want to ask you Karen is where do you think, from a financial and economic standpoint, all of these government financial programs leave us? As fearful as I am about COVID 19, I am even more fearful about the massive financial undertaking our government is embarking on and all the more worrisome is the lack of oversight.

    Your wisdom is appreciated.

    • Karen
      Mar 30, 2020 at 10:06 am

      Thank you Bart!

  50. Endeavor
    Mar 30, 2020 at 9:23 am

    One could argue US stocks are being fashioned to be the new Gold and Bitcoin. People the world over must have these stocks to survive dislocations of any economic emergency. No stocks, no modern life.

  51. dr spock
    Mar 30, 2020 at 9:23 am

    From Investopedia:
    Capitalism is a market-driven economy. The state does not intervene in the economy, leaving it up to market forces to shape society and life.

    • cb
      Mar 30, 2020 at 12:23 pm

      Funny, I was taught that Capitalism was where the means of production were privately owned.

      interesting how the language is continuously bastardized

      • Ensign_Nemo
        Mar 30, 2020 at 10:25 pm

        Do you remember when you were young and “bankruptcy” meant that a bank had ruptured, and was completely shut down by the regulators without any bailouts or mergers?

        If you do, you must be about 100 years old, because that scenario has very rarely happened since the Great Depression to commercial banks, and since Bear Sterns died in 2008, it has not happened to any large investment banks.

        “Bankruptcy” today doesn’t happen to banks, only to lesser corporations such as retailers and manufacturers, and of course to ordinary everyday American citizens. If a banker f’s up big time, the Fed simply bails the bank out.

        Hell, they have even set the precedent in Cyprus that a bank can simply “bail in” any depositor and take their money, even if that means that the “bankruptcy” is simply transferred from the bank to the depositor.

  52. Unamused
    Mar 30, 2020 at 9:34 am

    The U.S. Tried to Build a New Fleet of Ventilators. The Mission Failed.

    NYT. A must read.

    This is very much “sabotage” as Veblen would have understood it: “a deliberate restriction of the productivity of capital and labor in order to keep prices and profits higher.”

    The pandemic isn’t a problem for corporatist pandemic profiteers. It’s an opportunity. They’re cashing in.

    In a sordid slime harmonious Greed was born in yonder ditch,
    With a longing in his bosom—and for others’ goods an itch.
    As Christ died to make men holy, let men die to make us rich—
    Our god is marching on!

    • wkevinw
      Mar 30, 2020 at 10:09 am

      Unamused- thanks for the link.

      I that that if there were money to be made by developing some new ventilator business, every effort would be made (somebody would get rich). If something went wrong, it’s easier to attain stupidity than complex plans for profiteering down the road because of some catastrophe.

      These public health problems are actually very important debates. Where is the line between the incentives for individual firms to be profitable vs. public health benefit? That is the key point.

      Orphan drugs are a perfect example.

      Ventilators are basically commodities, like vaccines once they are developed. (very few pharma companies want to make vaccines- low margins)

      So as a public health policy, the question is, how are these to be managed? Not an easy answer.

      • Unamused
        Mar 30, 2020 at 11:11 am

        Where is the line between the incentives for individual firms to be profitable vs. public health benefit?

        You really don’t get it, do you?

    • csmith
      Mar 30, 2020 at 10:39 am

      This is what governments do. They help corporate interests shut down competition. In turn, corporate interests help governments get elected. The biggest problems of monopoly and gouging happen in the industries where returns on capital are not limited (the utility model), but competition is limited in some other way – medical equipment is a perfect example. Payers will only pay for a procedure done in a certain way, or with certain prescribed risks or outcomes. Cosmetic surgery vs. other kinds of surgery is a perfect example. The cosmetic market is way more competitive.

      • Unamused
        Mar 30, 2020 at 11:41 am

        This is what governments do. They help corporate interests shut down competition.

        This is what corporations do. They take over the government to shut down resistance to their rapacity.

        Fascism is government of the corporations, by the corporations, for the corporations.

        The Executive branch, a majority of the US Supreme Court, the entire Republican party, and a majority of the Democratic party, including the DLC, are corporatists, stooging for transnational corporations.

        Only Democratic appointees on the USSC and progressive Democrats in congress aren’t in on the corporatism and represent the interests of the people, and they are flogged as ‘socialists’ by the rest.

        When I gave food to the poor, they called me a saint. When I asked Why the poor were hungry, they called me a communist.

        – Dom Helder Camara, Archbishop of Recife, Brazil.

        • cas127
          Mar 30, 2020 at 5:14 pm

          Una,

          When gvt works, you credit socialists.

          When gvt fails, you blame corporatist capture.

          How about telling us in *advance* which gvt programs will work. That might be useful…and we can confirm your predictive powers.

          Any program that ignores the incentives created is going to fail.

          Any program that ignores oversight is going to fail.

          But spending gvt money is how political power is bought in practice.

          Policing the spending of that money is…subverted politically.

        • Unamused
          Mar 30, 2020 at 5:38 pm

          Policing the spending of that money is…subverted politically.

          And that’s unfortunate.

          Congressional oversight over $500 billion of the bailout slush fund was denied as a condition for the bill’s signing. It’s an enormous amount of public money to be given to a corrupt administration with zero accountability.

    • Cas127
      Mar 30, 2020 at 1:44 pm

      And what was gvt oversight doing over the yrs of the corp f*ckery pokery that kept delaying actual ventilator production?

      I mean besides continuing to feed money into it.

      The NYT timeline sounds essentially identical to almost every large scale gvt software or infrastructure project ever undertaken – huge delays and huge cost over-runs.

      Simply putting more and more resources into an intrinsically dysfunctional process does not fix it…it feeds it.

      • cb
        Mar 31, 2020 at 11:37 am

        You are making Unamused’s point.

  53. All I Need Is A Miracle
    Mar 30, 2020 at 9:42 am

    Judging by the comments and the gurgling in my gut, Karen really hit a raw nerve here. Well said!

    Yes, the game is rigged, and the longer it persists the more rotten it becomes and the more brazen it is. With lobbyists, politicians and the MSM working together, truth and good sense haven’t a chance.

    The FBI and the police/surveillance state take care of any serious protests. so what options are there, but to stick it out and wait for the house of cards to collapse?

    As we are seeing with the virus, even this is not enough to keep the sociopaths and billionaires from gaming the system for their own benefit. and let’s not forget it was the supreme court’s decision that “money is speech” that enabled the level of corruption we now face.

    So what’s the miracle that’s going to turn the tide?

  54. Lisa_Hooker
    Mar 30, 2020 at 10:04 am

    I still await the announcement of the SOLTVRP facility. (Signature-Only Loans To Very Rich People)

  55. Michael Engel
    Mar 30, 2020 at 10:06 am

    1) The DAX is up 1%. but the German rates are down, including 3M. All German rates are underwater, in negative territory.
    2) SPX is up 2% up, above Feb 2018(L) support line that became resistance, inside the 2Y trading range, still below last week high.
    3) US 3M, 6M & 1Y are up, waiting for tsunami on the front end, but the long duration turned down. US yield curve is flattening.
    4) When this bear market rally will be over, and SPX will lurch down,
    US yield curve will invert underwater.
    5) The US 10Y minus the German 10 will be ==> underwater, in negative territory !!

  56. Michael Engel
    Mar 30, 2020 at 10:18 am

    The Fed number #1 job since 2013 ==> support our national interest.
    The Fed is more powerful and important than DOD.

  57. c1ue
    Mar 30, 2020 at 10:23 am

    I think the author has drawn the wrong lessons from the past.
    If the US was alone in locking down (and thus damaging its economy), that would be one thing.
    But lockdowns and helicopter money are happening all over the world.
    The USD is furthermore at literally historic highs – so it does not appear that the ginormous money printing is fazing those mythical foreign investors.
    I agree on the brazen-ness of the corporate handouts, but this isn’t any different than 2008.

  58. Michael Engel
    Mar 30, 2020 at 10:27 am

    since 1914 at age 6M, converted by Princeton Wilson.
    Real Goods Bills were dumped in the swamp, and US treasuries moved in, to finance an anti war, war. the last war in history, with the help of the media.

    • Javert Chip
      Mar 30, 2020 at 12:03 pm

      I’d bet even those pretending to understand your deliberately-Delphic pronouncements are impressed by the density of verbal fertilizer.

  59. Iamafan
    Mar 30, 2020 at 10:52 am

    Meanwhile in the real world, one of our old jewelers got shot and killed. He was 69. If the coronavirus does not get you, something else will.

    My daughter in law finally got her operation last midnight. Picked her up this morning. All 24 hour drugstores closed. She and my son escaped NY, and drove here to bordering Connecticut. Hospital was split in two. One side for covid-19 and the other for all other emergencies. She was confined in the pedia ward. Hopefully, no infection. Now to finish our quarantine.

    You think I care about what the Fed does? We don’t have time for that.

  60. Mar 30, 2020 at 10:53 am

    You mention corruption without pointing any fingers, such was the reign of our 44th emperor. Corruption became endemic during the 21st century, and the growth of the tax haven industry. Even little guys could hide their assets. There was venture capital, and political Super Pacs, and Russians buying up land near Monte Carlo. Collateral went offshore. Such is the essence of leveraging, you do not need to expand the money supply, you simply take back collateral which has been securitized. Underwrite your kids mortgage, then move those pledged assets offshore in ways they cannot see. Scream fraud and the entire system collapses, but let the Fed chief print a few trillion and reliquify the banks who are missing collateral, and the public assumes all is well. They think fraud is institutionalized, while it is not, only the solution. This time the collateral black hole is much bigger, and it is global. There are countless trillions out there in assets that now face devaluation, who don’t want to render unto Caesar.

  61. SocalJim
    Mar 30, 2020 at 12:08 pm

    Changing my base case of a V shaped recovery to a U shaped recovery.

    • MD
      Mar 30, 2020 at 3:48 pm

      And you’re still guessing.

      So given that, what’s the point of the ‘insight’?

  62. RD Blakeslee
    Mar 30, 2020 at 12:10 pm

    Considering Robert Burns’ poetic line: “The best laid plans o’ mice and men gang aft aglee”, for which he highly thought of, I wonder what the mouse thought?

    From way up there in this thread:

    VintageVNvet
    Mar 30, 2020 at 8:54 am

    “So you don’t consider the actions of the mob during the French revolution (etc) .”

    In his book “Three Centuries of Harpsichord Making” Frank Hubbard lamented that only three French expressive double manual harpsichords survived the revolution. The rest were burned during same.

    This mouse laments the fact that, when he built his harpsichord in 1970, he had to go to the Smithsonian’s ancient instrument section and prevail on the then director Hellen Hollis, to inspect their copy. This mouse would have liked material closer to home.

  63. LouisDeLaSmart
    Mar 30, 2020 at 12:33 pm

    \\\
    Since 2008 there were no repricucions for bailout funds being abused for individual gains. Why would there be ay now? I dont get the surprise part.
    \\\
    In the existing system they are knowingly operating in the gray zone. The system was designed with this grayzone, and nothing was done about it. Since it’s legal it is not corruption, just a very weird system where they have all the money and power.
    \\\
    “…It is a giant step towards the nationalization of US financial markets.”
    No, markets are not nationalised, only the loses. The gains are distributed amongst the few.
    \\\
    Since 2008 nothing changed. It’s the same game, the same players, and a similar outcome.
    \\\

    • cb
      Mar 30, 2020 at 2:00 pm

      Well what’s to be expected in a system set up where one can lie truthfully and steal legally.

      and where all sorts of theft and misdeeds can be done under the cover of limited liability.

      and where a favored enitity has the power to create money and distribute it to favored entities.

  64. Iamafan
    Mar 30, 2020 at 1:24 pm

    Up close and personal. My business partner’s doctor in Queens, NYC just died of coronavirus.

    My nephew’s friend got a kidney transplant at UCLA last week but died at the same hospital because of the virus.

    This ain’t a theory anymore when your friend’s friend start dying.

    • Bet
      Mar 30, 2020 at 7:34 pm

      This I think will it most if not all of us close to home Something wicked this way comes. Peace to you

  65. George W
    Mar 30, 2020 at 1:31 pm

    The Fed/Treasury is calling everyone’s bluff…

    Where is the inflation where is the drop in the dollar.
    The more things change the more they stay the same.

    The skeptics are wrong and the dollar is King.

    • MD
      Mar 30, 2020 at 3:42 pm

      Drop in the dollar against what?

      It’s certainly dropping against gold steadily and surely as the latter proves its worth.

      Against other useless FIAT – who cares? ‘King’ of nothing. Ether.

      • Cas127
        Mar 30, 2020 at 4:53 pm

        “Against other useless FIAT – who cares? ”

        Race of the printing presses…

        The interesting thing to me us just how far productive countries (the ones with the actual factories) will go (devaluating their own currency) in order to exchange real assets (goods) for little more than paper IOUs from importing nations (the dollar, US treasuries bought with said dollar, whatever other securities you can buy with said dollar before it depreciates, etc).

        The real goods have the actual utility value…the paper is nothing more than a promise of vague future claim rights. If the importer was capable of producing utility goods worthy of trade…perpetual trade deficits would not exist…but they most certainly do in the real world.

        • cb
          Mar 31, 2020 at 11:44 am

          @ Cas127

          1. ” “Against other useless FIAT – who cares? ”

          Race of the printing presses…”

          2. “If the importer was capable of producing utility goods worthy of trade…perpetual trade deficits would not exist…”

          1. good point
          2. not true in the world of wage arbitrage and financialization

  66. Iapetus
    Mar 30, 2020 at 2:59 pm

    I’m not sure a stimulus program that is designed to lend massively to corporate borrowers will keep us out of economic crisis.

    Before the Coronavirus, it was widely reported that one in six U.S. companies does not earn enough cash-flow to cover interest payments on its debt. Much of this corporate debt was used to pay for stock buybacks, leveraged buyouts, and on cash-flow negative companies which have rarely ever been profitable. Little of it was used to create any assets with value. The problem many corporations now face is when people stop spending, because of Coronavirus related shutdowns, then corporate cash-flows will shrink and this makes it even harder to service their excessive debts.

    A lending based stimulus program will only compound this excessive debt problem, and make corporate borrowers even more vulnerable to failure. When this happens, no amount of buying or liquidity will be able to support the equity and debt prices of a company in default.

    • Lisa_Hooker
      Mar 30, 2020 at 4:13 pm

      But corporate bailouts will allow them to service their excessive debt by staying current with their payments to the banks. So the banks will be earning a bit longer. Everything is OK. /s

      • Cas127
        Mar 30, 2020 at 4:57 pm

        Or loans from the G will get written off in some opaque manner, keeping the corps alive – both made good by Fed printing.

        So of course fiat magic saves us again./s

  67. Ed
    Mar 30, 2020 at 3:37 pm

    I completely agree. Companies that spent all their cash on buybacks and levered up deserve bankruptcy.

    Spend the money as a safety net for the citizenry. Let the companies go bankrupt and punish the investors who did not oversee their investment. That’s the way the system is supposed to work!

    Instead, reckless financial behavior is being rewarded. This reminds me of 2008. At least our leaders are consistent. /s

  68. Claude
    Mar 30, 2020 at 11:19 pm

    when a country reaches this unstoppable and endemic corruption it fails
    you cannot run a country on fakery
    Trust and much more transparency has to be restored
    History has teached us what not to do.
    there is no execption because what you do leads to the same outcome
    People have never changed if you let the greedy corrupt and no law inforced to protect the people you fail that is why history repeats.

  69. bigchin
    Mar 31, 2020 at 12:39 am

    capitalism without bankruptcy is like catholicism without hell

  70. Portia
    Mar 31, 2020 at 1:56 pm

    I am curious what this means: (Agence France)

    “The Federal Reserve announced a new facility Tuesday that will allow foreign central banks to temporarily swap holdings of US Treasury debt for US dollars.

    Amid the cash crunch and increased demand for dollars caused by the uncertainty around the coronavirus pandemic, the Fed’s “FIMA repo facility” will allow central banks to exchange US Treasury debt for cash, rather than selling them for bargain prices.

    Along with dollar swap lines the Fed already put in place for many central banks, this operation, which begins April 6, will “help support the smooth functioning of financial markets … and thus maintain the supply of credit to US households and businesses,” the Fed said in a statement.”

    • Portia
      Mar 31, 2020 at 2:06 pm

      Oh (zero-hedge)
      “In other words, just a week after the Fed “enhanced” its swap lines with central banks and included a bunch of non G-5 central banks to the list of counterparties, it has found that this is not working – perhaps due to the prohibitive rates on the facility – and is now handing out dollars outright against US denominated securities. We wonder if the central bank uptake will be any higher than the repo facility aimed at US dealers and which is now redundant. Of course, when that fails the Fed can just offer to buy all central bank securities in what even reputable FX strategists now joke is a Fed on full tilt, and intent on buying out all foreign central banks.

      And so, just as the financial situation was starting to stabilize, the Fed reminds everyone just how broken everything still is.”

    • Mar 31, 2020 at 6:15 pm

      Portia,

      These foreign central banks all sit on stacks of US Treasuries. So normally, if they need dollars, they sell Treasuries in the open market. And when they get dollars, they buy Treasuries in the market.

      In the new FIMA facility at the Fed, the foreign central banks sell those Treasuries to the Fed for dollars under repurchase agreements, and then when those repos mature buy the Treasuries back from the Fed for dollar cash.

      What this system does is give foreign central banks a way to turn their US Treasuries into cash without selling them outright in the market.

      This is different from the swap lines where the Fed lends dollars on collateral that is denominated in that country’s currency.

  71. CreditGB
    Apr 1, 2020 at 9:07 am

    “Chapter 11 of the bankruptcy code was designed as a mechanism to keep companies operating while they restructure their debts.”

    Ha! That’s almost funny. Chapter 11 is for the chumps. That was made clear in the Obama bail out of GM. It should have been pieced out and rehabilitated, but too many political types had skin in that game.

    • Apr 1, 2020 at 12:01 pm

      CreditGB,

      Shareholders of GM were totally wiped out. Plenty of bondholders got massive haircuts or were wiped out. Numerous plants, divisions, and subsidiaries were separated into the Old GM and shut down and/or sold piecemeal. The New GM that emerged was totally restructured, with hundreds of thousands of fewer employees. During the process it shed dozens of plants.

      The US provided a Debtor in Possession (DIP) loan to GM during the bankruptcy proceedings and received shares in the New GM. So that wasn’t a bailout of shareholders and bondholders. They got hammered.

      However, where the thing went haywire is that the union pension funds got a special deal and moved ahead of more senior creditors in the capital structure, at the expense of those creditors.

      • Portia
        Apr 2, 2020 at 10:41 am

        Mr Richter, do I understand you to say that union pension funds went ahead of investors and that this was a bad thing? I understood that when workers invested in pensions (before they were investment vehicles and even after) they not understand they were taking the same risk as say investing in a stock. How many workers really understood that their pension was part of a game of craps?

        • Apr 2, 2020 at 2:45 pm

          It violated the well-established rules of capital structure, that’s what I was saying.

        • Portia
          Apr 2, 2020 at 7:30 pm

          there are the fever dreams of a Milton Friedman and any economist of rules of capital structure and then there is what happens when the “human element” is inserted in practice. humans bend the rules to their own advantage, in private. For example, the Graham-Leach-Bliley Act. The structure there is a bunch of humans who got together with a plan, ala to get rich, and persuade the powers that be to pave the way for them particularly.
          Peter Gowan at Buzzfeed today:
          “I hope that in the coming months and years that we’ll see a revitalized labor movement,” Gowan said. “I hope the left, and people in general, internalize that a lot of the things you’re told are rules are actually just norms created for the preservation of property and the rights of capital.”

          There are no rules if people decide not to agree any more.

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