Today is the end of March. April has been essentially "canceled". Now, what?
love to be in possession of an accurate crystal ball right now. As long
as Congress and the Federal Reserve System can churn out dollars that
find their way into the pockets of individuals, businesses, local
governments,foreign central banks and any other entity stressed by the
virus pandemic, social chaos will probably be avoided. But the clock is
ticking with the passage of each day and it may not be long before
citizens will become tired of being restricted in their movements and
decide to gamble on their chance of catching the coronavirus and
surving it if they do. It is not, after all, a death sentence - -
although old people with pre-existing health liabilities often wind up
in a morgue if they catch it.
"We're all in this together," remarked a TV news anchor
recently. Quite true. And it has made planning for the future more
difficult than ever. We have reports of our great-grandchildren
completing their present school year with laptop computers at
home. Public schooling is only one facet of life that's been
turned upside down. And economists are trying to figure out of the
recession into which we are sliding will deteriorate into something
resembling the Great Depression of the 1930s. After all, the machinery
of a huge economy has never been stopped so abruptly before.
Unemployment is expected to jump into double digits before the year is
out, which leads to the question - "What will the econmy look like at
election time in November?" Will liberal Democrats be able to
find a Franklin Roosevelt who can roll over a Herbert Hoover-like
One thing for sure. A lot of drama awaits us in the weeks ahead.
And don't forget to wash your hands!!
Americans Hoarding Cash at the Fastest Pace Since Y2K ~Wall Street Journal
up in the Great Depression we vividly remember how scarce cash
was. Frugal people like our grandmother always managed to squeeze
a little change out of grandfather's weekly pay packet from the shoe
factory. As long as her old sugar jar had some cash in it we were
not going to starve.
By the time the 20th century was over Americans had
switched to a debt-based currency and had learned to live using credit
cards and saw little need for pocket cash.
was a way of life and the economy boomed on the wings of IOUs.
Bubbles had appeared in the economy but no one that an insidious
disease call COVID-19 would be the huge pin that would pop all the
bubbles and bring the economy crashing to earth.
Suddenly, a scamble for cash began.
On stashing cash.
John Cochrane, a senior fellow at the Hoover Institution, writes in the
March 18th Wall Street Journal: "Had
everyone kept a few months of cash around things would be fine. But
many did not, and we're beginning to see a scramble for cash."
Financial guru Suze Orman has long advised
that households should have at least six months of money set aside to
cover running expenses in case of a sudden loss of income.
This reminded us that earlier this month customers at a Bank of America
branch in Midtown
Manhattan, the financial heart of New York, were lining up to take cash
out of their accounts — sometimes tens of thousands of dollars at a
people sought huge sums that
the bank branch, at 52nd Street and Park Avenue, temporarily ran out of
$100 bills to fulfill large withdrawals, according to three people
familiar with the branch’s operations. The shortage hit after a rash of
requests for as much as $50,000, said two people who witnessed the rush.
late friend, Fred, used to keep $5,000.00 in cash in a shoebox in his
closet. We pointed out he could have left that sum in a savings
account and earned a little interest rate on it, but he countered with
"Sure, but I consider the lost interest merely as the cost of having
cash on hand in case the banks run out of cash one day, or are closed
for some reason."
The run on cash at the BofA Midtown Manhattan was short lived because
the Federal Reserve keeps a big supply of paper currency for
distribution almost as fast as banks need it. Still, the incident
in Manhattan is a reminder that people who pride themselves on living
an almost cashless life have second thoughts in the face of a virus
pandemic. Fiat paper currency and base-metal coins may not meet
the classic definition of "money" but it certainly is popular in
" Italy recently reported a 20% increase
in CV cases in one day. Italy is sadly the model for the world. I
implore everyone to be extremely careful and self isolate themselves.
Doctors and hospitals will not have the capacity or the tools to help
us all." ~Egon von Greyerz.
Von Greyerz is a Swiss gold bug, so mainstream economics experts
reflexively scoff at his conclusion. But the monetary dominoes he has
long predicted would one day fall are toppling with global shattering
"But this, too, shall pass" he assures us.
Moreover, after discussing the bleak situation he points out that while
we must separate ourselves from crowds for the time being we live in an
extraordinary time of high tech connectiveness with which we can
interact with family and friends wherever they may be.
It's a longish piece but worth the time. It
contains some nuggets of wisdom. Now that his main long range
coming true it might pay to find out what he thinks the future
DEMISE OF FINANCIAL SYSTEM
In the midst of panic and chaos it's hard
to remember that getting coronavirus is not necessarily a death
sentence. It's a real danger for those of us in our senior years,
particularly if we have underlying respiratory and other medical
challenges such as diabetes. One wag has suggested the virus was set
loose in the world to relieve the economy of the burden of supporting
the growing masses of frail elderly. We don't believe that to be true,
but we accept the fact that the world's elders must be particularly
careful to avoid contagion.
However, the elderly, with
respiratory weakness, often do not survive. Pandemic
could cause pandemonium.
Let common sense and cool
and the Missus were born not long after Herbert Hoover moved into the
White House. Now we find ourselves old, suitably frail for our
years, and perfect targets for the coronavirus. We have modified
our habits a bit and don't get out and about very much. Seems
like the sensible thing to do because our immune systems may not
be up to fending off the virus if we encounter it.
Our bigger concern is preserving our modest savings to help us foot the
bills if Providence allows us a few more years on the planet.
They are taking a beating right now with low interest rates, persistent
inflation, and plunging prices in financial markets.
As frightening as a
virus pandemic may be, the full
economic effect of it can only be imagined. And we imagine attempts to
inflate our way out of this scrape won't work. Even the power to create
currency out of thin air loses its clout eventually and the result is
a calamitous monetary deflation like the 1930s. Economists claim that
modern financial tools will prevent that from happening. The historical
record is not on their side. BUT NOTE THE DOLLAR NUMBERS IN
THIS ANNOUNCEMENT FROM THE FED:
As a part of its $60 billion reserve management purchases for the
monthly period beginning March 13, 2020 and continuing through April
13, 2020, the Desk will conduct purchases across a range of maturities
to roughly match the maturity composition of Treasury securities
outstanding. Specifically, the Desk plans to distribute reserve
management purchases across eleven sectors, including nominal coupons,
bills, Treasury Inflation-Protected Securities, and Floating Rate
Notes. The distribution of purchases across sectors will be the same
distribution as the Desk uses to reinvest principal payments from the
Federal Reserve’s holdings of agency debt and agency MBS in Treasury
securities. The first such purchases will begin tomorrow, March
• Today, March 12, 2020, the Desk will
offer $500 billion in a three-month repo operation at 1:30 pm ET that
will settle on March 13, 2020.
• Tomorrow, the Desk will further offer
$500 billion in a three-month repo operation and $500 billion in a
one-month repo operation for same day settlement.
• Three-month and one-month repo
operations for $500 billion will be offered on a weekly basis for the
remainder of the monthly schedule.
• The Desk will continue to offer at least
$175 billion in daily overnight repo operations and at least $45
billion in two-week term repo operations twice per week over this
These changes are being made to address highly unusual
disruptions in Treasury financing markets associated with the
coronavirus outbreak. Reserve management purchases into the second
quarter will continue to be conducted with this maturity allocation.
The terms of operations will be adjusted as needed to foster smooth
Treasury market functioning and efficient and effective policy
the Federal Reserve is in a panic. It has authorized the creation of
$4,000,000,000,000.00 intended to keep financial markets and the
economy from crashing. This looks suspiciously like massive
How will all this resolve itself? No one really knows, but
we're preparing ourselves for a long hot summer. Stay tuned.
By the way, even though the modern dollar has no legal
connection to gold or silver, the dollar price decline at the moment is
deflationary sign...that is, in relation to gold the
One can buy more gold (and silver) today for a dollar
than a week ago. People who buy gold as an "investment" in the hope the
price will rise are betting monetary inflation will overwhelm. But, as
have argued for years, there has never been an inflationary period that
did not one day stop.
CORONAVIRUS IS NOT NECESSARILY A DEATH
A Rhode Island teacher, who picked up coronavirus on a trip to Italy,
reports that the shortness of breath was frightening and the illness
was a miserable experience, but his natural immune system has been able
to keep him going. He thinks he got the bug from a tour guide who
was not feeling well. The guide and the teacher swapped a hand
held microphone several times.
Being elderly and having had good luck
managing respiratory illnesses through the years with ascorbic acid
(vitamin C), we're now taking 1,000 milligrams each day and will
step up the dosage at the first sign of a sniffle. We were
impressed years ago by the work of Dr. Linus Pauling on ascorbic acid
research. We also learned that, at least for us, taking
zinc losenges within minutes of the first sign of a sore
throat would eliminate the discomfort within an hour or two.
Our family physician remarked last week that
he thought the reaction to the coronavirus outbreak was
overblown. He observed that the death rate from flu was far
greater in the United States than the numbers dying from coronavirus or
the elderly have more than a virus to worry about. Prudent
seniors who labored for years to pile up some savings in the hope they
would ease their retirement years are being shortchanged. The
value of their IRAs has declined. Interest rates on bank savings
are almost nil. An elderly person once thought savings of
$200,000 or so would yield a comfortable stream of interest to help
tide them over during their "waiting years." Now they're lucky to
see $2,000 a year interest from such a sum.
When President Trump calls on the Federal
Reserve to lower interest rates he does not have elderly savers in
mind. His eye is on the next election. He cannot afford to
see an economic recession slide into view before November, 2020,
although the odds of that happening are inccreasing with every
The Fed has almost no wiggle room with
respect to cutting interest rates. And it's running right now
into severe headwinds caused by unsustainable debt carried by
corporations, consumers, and government. The tipping point was
the complex economic impact of the coronavirus. How it will play
out no one is sure.
What to do? Play it
cool. Don't panic. Think twice before spending money on
things you don't really need. Steer clear of snifflers and
sneezers. Wash your hands frequently.
"This, too, shall pass."