" The debt can’t be paid back, will never be paid back… and  the jig is up."

            ~ Howard Kunstler
     


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(Caveat Emptor)

News and opinion from all over the political universe. 

Much of it to be taken with several grains of salt.

March 31st,2020

   Email:  Wrisley.com
Today is the end of March.  April has been essentially "canceled".  Now, what? 
      We'd 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 Trump? 

   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

   Growing 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. 
 
Buy-now-and-pay-later 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 time.
  So many 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.

                Our 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 emergencies.

               

A STRANGE NEW WORLD.
    " 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 consequences.

     "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 prediction is coming true it might pay to find out what he thinks the future holds.  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.

 
Pandemic could cause pandemonium.
Let common sense and cool heads prevail. 
   We 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 13, 2020.

•    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 period.
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 implementation.

O    Obviously, 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 Quantitative Easing.

   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 a deflationary sign...that is, in relation to gold the dollar is  stronger.  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 we have argued for years, there has never been an inflationary period that did not one day stop.


CATCHING  CORONAVIRUS  IS  NOT  NECESSARILY  A  DEATH SENTENCE.
However, the elderly, with underlying respiratory weakness, often do not survive.

   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 COVID-19. 

      But 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 coronavirus headline. 

      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."


 

   Claiming old age our staff curmudgeon takes to his rocking chair now and then and puts his trusty 1942 Royal typewriter in the storage closet.  "I'm retired," he says. 

        And then the absurdities of the passing parade catch his attention and he interrupts his retirement to say something about it.
MONEY MAGIC
by Potiphar Gride

      "As a schoolboy demonstrating magic tricks in a novelty shop one of my favorite tricks involved a blank slip of paper the size of a dollar bill.  Right under the customer's nose I would carefully fold the paper into a small bundle, remarking that this was a good trick to know when one comes up short of cash.  Then, without removing the folded paper from the customer's sight, I slowly began to unfold it.  To the astonishment of the beholder it was - - a crisp $1.00 silver certificate! 

       " Effects  involving the creation of money out of thin air go over very well.  The U.S. Congress has been pulling a trick similar to this since the end of World War 2.  The public eats it up.  We fall for the trick hook, line, and sinker."  Money Magic



GEARING UP FOR RECESSION.


      Covid-19 doesn't sound as ominous as Coronavirus, but whatever the bug is called we hope to steer clear of it just as we hope to avoid the flu, colds, and "the old man's friend," pneumonia.  The growing virus from China has alarm bells ringing everywhere.  Germany has declared it a pandemic.  The death rate from coronovirus in the U.S. has reached 9 and it hasn't reached epidemic levels yet, although the Seattle, Washington streets are reported to be sparsly populated. 

       It may be time to pay attention to the ancient adage..."There is nothing to fear but fear itself."  (FDR revived the expression at the outset of the Great Depression.)
     
        Flu is still killing Americans at a far greater rate than coronavirus.  But we manage to keep level heads about it. 

         Hugging and handshaking   may be going out of fashion, though.   Probably a good thing.

          In the meantime, our concern about the next recession occupies  much of our thinking.   We and the Missus  have  experienced eleven  U.S.  economic recessions since we married in 1948.  We have a hunch the Federal Reserve will not be able to prevent the 12th, despite extremely low interest rates.  Thanks to the complication of the coronavirus scare  we won't be surprised to see the economy  sail into recessionary headwinds before the end of summer.  Terrible timing, of course, for a president running for re-election.  Trump, in fact, will be howling for lower interest rates even if it runs the Fed Funds rate to zero.  He needs the economy to be showing signs of life on election day in November.  But we have reached the stage where infusing more debt based currency into the economy is like giving a transfusion to a corpse. The economy is way overburdened by private, commercial, and government debt.  It needs to hit the pause button and straighten itself out.  Debt based "prosperity" can never endure forever. 

          We and the Missus never thought we'd live long enough to see a twelfth economic recession, but now it seems inevitable. 




Fed chairman Powell assures the world the U.S. economy is fundamentally strong....BUT.
   President Trump got his wish.  He wanted the Federal Reserve to push the monetary inflation button and it did with a whopping half percent cut in the Fed Funds rate. Fed chair Jerome Powell says the U.S. economy is basically sound but is facing headwinds because of the coronavirus scare.  The theory is that lowering interest rates makes it easier for new currency to be borrowed into existance. At first glance this is encouraging to borrowers but not so much for savers. For people who had cash in banks once paying as much as 2.1 percent have already seen their rates cut to 1.7 percent and now will undoubtedly see a drop to 1.25 or less. 

  It should be remembered the Fed can't merely print money and put it directly into curculation without some action from the marketplace, chiefly from borrowing the new printing press currency at lower interest rates. As one wag said today, "At some point the central banks may have to pay you to borrow their money."  The prospect of negative interest rates has already materialized among some overseas banks.
 
 
   Stay tuned!